Jewett-Cameron Trading (NASDAQ:JCTC) executives said the company is working through tariff-related cost pressures, weak consumer sentiment, and inventory challenges as it moves to realign operations around its metal fencing category and reduce costs during fiscal 2026. Management discussed these themes while reviewing results for the first quarter ended November 30, 2025.
Revenue declined as growth in metal fencing and Greenwood was offset by lumber and Pet
Chief Executive Officer Chad Summers said the company saw year-over-year growth in its metal fence business in the quarter, describing the increase as “small” but encouraging given tariffs and “continuing negative consumer sentiment.” Summers also said the Greenwood subsidiary experienced growth.
Van Domelen said Greenwood, the company’s industrial wood business, posted a 45% sales increase, citing strengthening demand from municipalities and transit operators and the addition of a new non-transit industrial customer. That growth was offset by lower sales in lumber and Pet products. Management noted the company had previously announced initiatives to sell excess inventory in those areas due to “challenging market conditions and changes in customer arrangements.”
On lumber, Van Domelen reiterated a point from the prior quarter: the company’s primary lumber customer has given notice of its intent to transition away from a consignment arrangement in calendar 2026. He said the company is in discussions with that customer and other third parties about purchasing excess lumber inventory.
Inventory write-downs and liquidation sales pressured gross margin
Management said gross margin results were heavily affected by inventory actions and tariff-related cost pressures. Summers said gross margins were negatively affected by a write-down on certain Pet and lumber inventory, along with liquidation sales of already reserved inventory that “carried zero margin.” He added that without these factors, gross margins would have shown improvement, and he said the company is making progress aligning pricing with customers to better reflect margin improvement potential.
Van Domelen quantified the margin change, reporting gross operating profit margins of negative 12.5% in the quarter versus positive 18.3% a year earlier. He attributed the “largest impact” to $2.2 million in additional inventory write-downs, primarily related to reduced fair market value of Pet and lumber inventory. Without these negative impacts, he said management believes margins would be “significantly improved,” though still “not where they need to be.”
On tariffs, Van Domelen said the company has worked to adjust selling prices to recapture new tariff costs, but rapid and unpredictable rate announcements made the process difficult because it depends on customers accepting higher prices. He said progress has been made and that the company expects prices to normalize as the global economic situation stabilizes.
In response to a question during the call, Summers said the company was successful in getting new pricing accepted to minimize margin erosion from increased tariffs, with most implementation beginning in the first quarter of fiscal 2026.
Cost actions underway as the company targets $1 million to $3 million in annual OPEX reductions
Summers highlighted a reduction in wages and employee benefits to $1.2 million from $1.7 million, attributing the change to headcount reductions. He said the company incurred some one-time fees tied to consultant engagements and increases in lumber warehousing costs, but emphasized the goal of aligning the cost structure with an efficiency strategy.
Van Domelen reported total operating expenses of $2.7 million for the quarter, compared with $2.6 million in the prior-year period. He said:
- Wages and employee benefits declined to $1.2 million from $1.7 million as headcount was reduced.
- SG&A increased to $1.4 million from $809,000, primarily due to higher professional fees for additional consultants and higher lumber warehousing costs tied to excess inventory.
Both Summers and Van Domelen reiterated an ongoing plan to reduce annual operating expenses by $1 million to $3 million. Summers also said that as inventory in certain business lines—mainly Pet and lumber—is reduced, warehouse expenses should fall, benefiting costs and bolstering the balance sheet.
Net loss widened amid write-downs; inventory levels fell from fiscal year-end
Van Domelen said the company’s net loss for the quarter was $3.9 million, or $(1.12) per basic and diluted share, compared with a net loss of $658,000, or $(0.19) per share, in the prior-year quarter. He attributed the results primarily to inventory write-downs.
On the balance sheet, Van Domelen reported inventory of $13.5 million at November 30, 2025, down from $15.9 million at the end of August. He said the company increased its inventory allowance to $3.05 million, up $1.85 million from August. The increase reflected a $2.2 million reserve adjustment, partially offset by usage during the quarter.
Management said it is working with third-party liquidators to sell “high-quality but slow-moving inventory” to generate cash, clear warehouse space, and reduce warehousing and maintenance costs. In response to a question about inventory composition, Summers said the company does not disclose category-level detail, but noted metal fence inventory is the “highest velocity,” while a portion of Pet inventory has been slow-moving. He also said the lumber excess inventory was increased to support a customer program through the summer and represented “a good portion” of inventory in the quarter.
Credit facility amended to provide additional flexibility; non-core asset monetization under review
Executives also discussed liquidity and efforts to monetize assets. Summers said the company entered a revised lending agreement to provide additional flexibility to support operational realignment, and he described that flexibility as important as the company streamlines the organization and prioritizes core initiatives.
Van Domelen provided details on the amended agreement with Northrim, including increased borrowing capacity under the credit line. Under the amended terms:
- The maximum amount of accounts receivable invoices Northrim will purchase at one time increased, and is not to exceed $8 million, up from $6 million.
- Advances against inventory increased to 25% to 50% of eligible inventory.
- The maximum amount the company may borrow increased from $4 million to $6.5 million.
He said amounts provided will be secured by certain real estate assets, and proceeds from the sale of any such assets will be used to pay down the credit line, after which the funding arrangement would revert to its original conditions and limits. Van Domelen added that the increased line provides “temporary additional flexibility” to fund operational realignment and purchase inventory ahead of the company’s typically busier spring and summer seasons. As of November 30, 2025, he said the company had borrowed $4.2 million against the Northrim credit line.
Separately, Summers said the company continues to evaluate strategic partnerships, collaborations, and potential divestitures involving select businesses and real estate assets. He said the efforts are focused on the industrial lumber subsidiary, selected Pet assets, the wood fencing business, and the potential sale of the seed processing and storage facility and innovation studio property. Summers said there was not much to report since early December due to the holiday season, but the company is “highly engaged” in advancing these initiatives in the new calendar year.
Looking ahead, Summers said the company’s objective is to exit fiscal 2026 with a long-term sustainable business model focused on its strongest product categories, supported by disciplined operations, and positioned to deliver enhanced value to shareholders.
About Jewett-Cameron Trading (NASDAQ:JCTC)
Jewett-Cameron Trading Company Ltd. is a supplier of `Value-added` building materials to major home improvement center chains in the western United States. The Company concentrates on the residential repair and remodeling segment of the building materials industry.
