Coffee Holding Co., Inc. (NASDAQ:JVA) reported fiscal third-quarter gross margin of 25%, compared with a revised 9.4% a year earlier. Results released September 11 covered the quarter ended July 31, 2026. The prior-year margin reflects a reclassification of certain expenses into cost of sales.
Net income reached $1.99 million, or $0.35 per share, compared with a $1.21 million loss. Revenue declined 9.3% to $21.7 million, while gross profit increased to $5.42 million from $2.26 million.
Coffee Holding Co., Inc. attributed the margin recovery to favorable inventory purchases, tariff refunds, and net trading gains. Cost of sales includes realized and unrealized results from coffee futures and options, making the composition of gross profit central to the investment case.
Bull Case
Management said Coffee Holding Co., Inc. retained its entire wholesale roasted-coffee customer base after choosing not to charge most of those customers tariffs during 2025. That preserves relationships through which better purchasing economics and new business can support future earnings.
Refunds explain only part of the reported profit. Management estimated their contribution at approximately $0.06 per share, or roughly 17% of quarterly earnings per share. The recovery therefore extends beyond tariff reimbursements, with inventory and trading benefits also contributing.
The balance sheet improved alongside earnings. Cash increased to $2.92 million at July 31 from $702,000 at October 31, 2025, while revolving borrowings fell to $2.15 million from $6.05 million.
Coffee Holding Co., Inc. generated $7.80 million of operating cash flow during the first nine months of fiscal 2026 and repaid $3.90 million under its credit line. The remaining credit-line balance was fully repaid during August, leaving a zero balance at August 31, 2026. Repayment reduces financing pressure and provides more flexibility when coffee prices move sharply.
Bear Case
The trading contribution was substantially unrealized. Quarterly futures and options results comprised $807,633 of unrealized gains and $186,950 of realized losses, producing a $620,683 net gain. The comparable quarter recorded a $769,846 net loss. Changes in contract values therefore explain a meaningful part of the gross-profit improvement.
Favorable inventory purchases also create a timing advantage. Coffee Holding Co., Inc. must replace that inventory while adjusting selling prices to competitive conditions. The spread between replacement costs and customer pricing will determine whether strong margins continue.
Revenue declined primarily because lower green-coffee prices prompted price reductions and promotions. The filing also cited lower sales volume. Customer retention needs to translate into sustained purchases for the recovery to support durable growth.
Cash generation benefited from $3.06 million released from receivables and $966,000 from inventories. Those working-capital benefits can vary between periods. Management also expects additional tariff refunds over the next two quarters, potentially supporting near-term earnings without establishing a recurring margin.
Hedge Fund Sentiment
The filings available so far reflect positions held before Coffee Holding Co., Inc. reported its fiscal third-quarter results. Insider Monkey’s database showed 3 hedge funds holding Coffee Holding Co., Inc. at the end of 2Q2026, down from 4 funds three months earlier.
Conclusion
Coffee Holding Co., Inc. has restored profitability, retained customers, and fully repaid its credit line. Those improvements support the recovery case, but 25% remains an unproven normalized gross margin. The strongest evidence will be stable volumes, profitable inventory replacement, and continued cash generation as tariff refunds and trading gains fluctuate.
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This article is originally published at Insider Monkey.
