Jewett-Cameron's Q3 2025 Earnings Call: Contradictions Emerge in Tariff Mitigation Strategies, Product Performance, and Strategic Focus

Date of Call: May 31, 2025

Financials Results

• Revenue: $12.6M, down 21% YOY (Q3 2025 vs $15.9M in Q3 2024); up vs Q2 2025 ($9.1M)
• EPS: -$0.18 per basic and diluted share (net loss $0.6M) vs $0.04 per share (net income $0.2M) in Q3 2024
• Gross Margin: 15%, down from 18.6% in Q3 2024 (pressure from higher tariffs, shipping costs, and lower‑margin mix)

Business Commentary:

* Impact of Tariffs on Revenue: - Jewett-Cameron's revenue for Q3 was $12.6 million, a 21% decline compared to the same period last year. - The revenue decline was primarily due to the uncertainty surrounding tariffs, which led to deferred purchases by retailers and consumers.

• Metal Fence Business Performance:
• The company's metal fence business saw a 4% decline compared to the previous year, while the Lifetime Steel Post (LTP) sales increased by 85%.

• The decline in the metal fence business was offset by the growth in LTP sales, driven by increased displays in Home Depot stores.

• Pet Business Weakness:

• Jewett-Cameron's pet business experienced a 44% decline during Q3 compared to the previous year.

• The decrease was attributed to ongoing supply chain issues post-pandemic, impacting the pet product segment.

• Gross Margin Decline:

• Gross profit margins for Q3 2025 were 15%, a decline from 18.6% in Q3 of 2024.
• The decline was due to higher tariff costs, increased shipping costs, and the shift towards lower-margin products.

Sentiment Analysis:

Overall Tone: Negative

• Management stated revenues were down 21% and reported a $650,000 loss, attributing the decline to tariffs and higher transportation costs. They disclosed gross margins fell to 15% from 18.6% a year earlier and noted customers deferred purchases amid tariff uncertainty, though they emphasized mitigation actions (multi-sourcing, pricing, cost reductions).

Q&A:

• Question from Robert Blum (Lithium Partners): I’ll sort of summarize tariff-related, you know, maybe speak just more broadly to some of your tariff mitigation strategies.
  Response: They began multi-sourcing in early 2023, shifting supply beyond China to Vietnam, Malaysia and Bangladesh to reduce dependence and partially mitigate China-specific tariffs.

• Question from Robert Blum (Lithium Partners): Talk about maybe your revised OpEx expectations, or what are your revised OpEx expectations expected to be?
  Response: No formal OpEx projections; focus is on efficiency—implemented ~20% workforce reduction, pursuing productivity gains, selective hiring for key roles, and investing in technology to further reduce structural costs.

• Question from Robert Blum (Lithium Partners): Any updates on your property for sale?
  Response: Property is actively marketed; no definitive sale or lease arrangement yet and the company will announce if/when one is secured.

• Question from Robert Blum (Lithium Partners): What % of total sales are the Lifetime Steel Post? I don’t know if that’s a number you’re able to provide.
  Response: Lifetime Steel Post represents approximately 8% of gross sales.

• Question from Robert Blum (Lithium Partners): What is the overlap, if any, between customers who purchase steel fence posts or other metal fencing products and customers who purchase pet fencing products or My Eco World products?
  Response: No direct customer overlap data in their database; management suspects some audience overlap (e.g., backyard animal containment and gardening) but has no definitive evidence.

• Question from Robert Blum (Lithium Partners): Have you considered cutting support for products that may be destroying value from an ROIC perspective? How might that affect relationships with key vendors, I guess, if you were to do so?
  Response: They continually evaluate product performance and would negotiate with suppliers; any discontinuation would be assessed case-by-case and depend on product size and supplier implications.

Contradiction Point 1

Tariff Mitigation Strategies

It involves the company's strategic approach to mitigate the impact of tariffs, which directly affects supply chain resilience and overall operating costs.

What are your strategies to mitigate tariffs? - Robert Blum(Investor Relations, Lithium Partners)

2025Q3: We began an early initiative in 2023 to source products from countries outside of China to reduce dependence on a single source, mitigating higher tariffs. The multi-source strategy spans Vietnam, Malaysia, and Bangladesh, ensuring a flexible and resilient supply chain. - Chad Summers(CEO)

How are you mitigating tariffs? - Robert Blum(Lytham Partners)

2025Q1: We have been working on mitigating the tariffs, and we've been very successful at that in terms of just finding different sources outside of China. In addition, we have been working with governments to try to get those tariffs reduced. - Chad Summers(CEO)

Contradiction Point 2

Product Performance and Strategic Focus

It highlights the company's approach to evaluating and managing underperforming product lines, which impacts strategic decision-making and resource allocation.

Have you considered cutting support for products that may be destroying value? - Robert Blum(Lytham Partners)

2025Q3: We constantly evaluate product performance and contributions to our business. If a product line underperforms, it would need to be part of ongoing negotiations with suppliers, and it would depend on the size of the product. - Chad Summers(CEO)

Have you considered discontinuing support for mature products that could be destroying value? - Robert Blum(Lytham Partners)

2025Q2: Our recent acquisitions are supporting the growth in our existing business and product lines and allowing us to expand our geographic footprint. - Chad Summers(CEO)

Contradiction Point 3

Tariff Mitigation Strategies

It involves the company's strategy to mitigate the impact of tariffs, which directly affects operational costs and profit margins.

What are your tariff mitigation strategies? - Robert Blum(Lytham Partners)

2025Q3: We began an early initiative in 2023 to source products from countries outside of China to reduce dependence on a single source, mitigating higher tariffs. The multi-source strategy spans Vietnam, Malaysia, and Bangladesh, ensuring a flexible and resilient supply chain. - Chad Summers(CEO)

Can you discuss your strategies for managing tariffs? - Robert Blum(Lytham Partners)

2025Q2: It's very hard to predict what's going to happen as the year unfolds. When we look at one of the components as an example, we're seeing tariffs coming on, tariffs going off, tariffs being reduced. So it's really challenging, and frankly, it's a really difficult decision. - Mitch Van Domelen(CFO)

Contradiction Point 4

Product Performance and Strategic Focus

It highlights the company's approach to evaluating and managing underperforming product lines, which impacts strategic decision-making and resource allocation.

Have you considered cutting support for products that destroy value? - Robert Blum(Lytham Partners)

2025Q3: We constantly evaluate product performance and contributions to our business. If a product line underperforms, it would need to be part of ongoing negotiations with suppliers, and it would depend on the size of the product. - Chad Summers(CEO)

Have you considered cutting support for mature products that may be destroying value? - Robert Blum(Lytham Partners)

2025Q1: Our recent acquisitions are supporting the growth in our existing business and product lines and allowing us to expand our geographic footprint. - Chad Summers(CEO)

Contradiction Point 5

Tariff Mitigation Strategies

It involves the company's strategy to mitigate the impact of tariffs, which directly affects operational costs and profit margins.

What are your tariff mitigation strategies? - Robert Blum(Lytham Partners)

2025Q3: We began an early initiative in 2023 to source products from countries outside of China to reduce dependence on a single source, mitigating higher tariffs. The multi-source strategy spans Vietnam, Malaysia, and Bangladesh, ensuring a flexible and resilient supply chain. - Chad Summers(CEO)

Have you factored in tariff volatility into your guidance? - Robert Blum(Lytham Partners)

2025Q2: We're seeing tariffs coming on, tariffs going off, tariffs being reduced. So it's really challenging, and frankly, it's a really difficult decision. - Mitch Van Domelen(CFO)