Adam JacksonGrowGeneration Corp. (Nasdaq: GRWG) reported a wider third-quarter net loss as revenue declined amid store closures and consolidation.
The Colorado-based hydroponic and garden chain posted a net loss of $11.4 million for the period ending Sept. 30, versus a loss of $7.3 million in the year-ago period. Sales fell 10% to $50 million.
“Our third quarter results were consistent with our expectations and reflect the substantial progress we have made executing on our strategic restructuring plan,” CEO Darren Lampert said in a statement Tuesday.
Proprietary brand sales jumped to nearly 24% of revenue in GrowGen’s core cultivation and gardening segment, up from 19% a year earlier, keeping the company “on track” to reach a 35% target next year, he said.
Same-store sales rose 13% in the quarter, “reflecting the strong performance of our core store locations as we right-size our retail footprint,” while operating expenses fell 14%, Lampert said. The company’s long-term financial position “remains strong” with $55 million in cash and no debt, he added.
The chain has closed 19 retail locations so far this year, including a dozen in the latest quarter, in a bid to consolidate its footprint and cut costs.
Still, those store closings and inventory clearance markdowns took a toll. The cultivation unit’s revenue tumbled 14% to $41 million in the third quarter, while gross margin shrank to 17% from 26% as GrowGen because of restructuring charges. In contrast, the company’s smaller MMI storage solutions division saw sales climb 13% to $8.6 million.
GrowGen said it recorded $2.1 million in costs related to the restructuring in the third quarter, including $1 million for inventory write-downs, $700,000 for store closure expenses and $200,000 for asset impairment. The company expects to incur a total $2.4 million in charges tied to the overhaul, which it aims to complete by early 2025. GrowGen anticipates generating annual cost savings of $12 million from the move.
In the meantime, GrowGen is launching an e-commerce portal this quarter as part of a “key” digital push to focus on commercial clients, Lampert said.
One comment
Anonymous
November 13, 2024 at 8:24 am
Wow, big changes for GrowGeneration! Closing 19 stores is no small move, but it looks like they’re really pushing to focus on what works—like boosting their own brand sales and getting into e-commerce for commercial clients. It’s a tough quarter for sure, but they’ve still got $55 million in cash and zero debt, which is huge. If they can actually hit those cost-saving goals and build out this new digital side, they might come out of this stronger than before. Fingers crossed that this strategy pays off!