Adam Jackson
Hydroponics retailer GrowGeneration Corp. (Nasdaq: GRWG) reported a slump in third-quarter revenue amid a challenging period for the industry.
The company’s revenue for the quarter ended Sept. 30 dipped 13% to $55.7 million, down from the previous quarter, underscoring the volatility in the hydroponics market.
The key metric of same-store sales fell by 14.4% from the year prior. The same metric saw a 15% slump at the end of the previous quarter, an unsettling sign that could suggest a more severe slowdown in consumer spending within the niche market.
As consumer demand softens, the company will continue to face the headwinds that have plagued the broader agricultural supply sector.
GrowGeneration saw a healthier profit margin of 29.1%, a notable increase over the previous year, indicating that its strategy to cut costs and improve efficiency may be working. The company trimmed its operating expenses substantially, contributing to the improved margin profile.
The Denver-based company reported a net loss of $7.3 million, a marginal increase from the $7.2 million loss witnessed in the same period last year. Adjusted EBITDA shrank to $900,000 from a $2.7 million loss in the prior year.
“As I have said before, we are constantly evaluating our network to enhance profitability and, as such, we consolidated 6 retail locations during the third quarter,” CEO Darren Lampert said in a statement, citing a 12% cut in store operating expenses and nearly a 14% reduction in selling, general, and administrative costs.
“We continue to make progress on our digital transformation efforts and we are excited about the potential of our new ERP system to enable further efficiencies in our supply chain and ultimately improve our end-to-end customer experience,” Lampert said.
The company’s liquidity remained robust, with cash and marketable securities totaling $66.6 million. Still, current liabilities have grown, rising to $40.5 million, and inventory levels suggest a potential overhang should consumer appetites not rebound.
Despite the downturn, the firm upheld its financial forecast for the year, signaling confidence in its strategic pivot toward proprietary products and a streamlined store footprint.
“Further in the fourth quarter, we expect to consolidate 6 additional locations where we identified cost rationalization opportunities through our ability to serve a similar customer base from a smaller footprint,” Lampert said.
The company anticipates revenues to reach the $220 million to $225 million range, albeit with expected losses on adjusted EBITDA.
