GrowGeneration Corp. GRWG, the largest chain of specialty hydroponic and organic garden centers with 63 locations across 13 states, reported its financial results late Tuesday for the first quarter ended March 31, 2022.
First Quarter 2022 Highlights Compared to Prior-Year Period
- Net sales declined 9.2% to $81.8 million driven by softer industry demand.
- Comparable store sales for the quarter decreased by 35.5%.
- Net loss of $5.2 million compared to net income of $6.1 million last year.
- Loss per share of $0.09 in the quarter.
- Adjusted EBITDA loss of $0.7 million
Comments From Management
“The GrowGen team faced significant industry disruptions head-on, and we exceeded our internal expectations in the first quarter despite a very difficult macro environment. The first half of last year was exceptionally strong with same-store sales up approximately 60% compared to the same period in 2020,” Darren Lampert, GrowGeneration’s co-founder and CEO stated in a press release. “In the first quarter of 2022, on a two-year basis, our same-store sales increased 7.3% compared to the first quarter of 2020.
“We expect the revenue and gross profit headwinds in the first quarter will become more pronounced in the second quarter, with the remainder of 2022 facing more pressure than we initially planned. We remain confident in the longer-term opportunity that exists within hydroponics.”
First Quarter 2022 Consolidated Results
- Revenues declined $8.3 million, or 9.2%, to $81.8 million, for the quarter ended March 31, 2022, compared to $90.0 million for the first quarter ended March 31, 2021.
- E-commerce revenue, including growgeneration.com and Agron, was $5.3 million in the first quarter, compared to $6.0 million for the same period last year.
- Revenue from non-retail operations, including distributed brands and MMI, was $12.2 million in the first quarter of 2022, compared to $2.8 million in the same quarter last year.
- Gross profit was $22.1 million for the first quarter of 2022, compared to $25.4 million for the first quarter of 2021. The gross profit margin decreased approximately 110 basis points to 27.1%, compared to 28.2% in the same quarter last year.
- Operating expenses in the first quarter of 2022 were $29.4 million, compared to $17.6 million in the prior year. The increase was primarily attributable to the addition of non-retail operations through acquisition.
- GAAP pre-tax net loss was $6.8 million for the first quarter of 2022, or a loss of $0.09 per diluted share, compared to pre-tax net income of $7.7 million in the first quarter of 2021, or earnings of $0.10 per diluted share.
- Non-GAAP earnings before interest, taxes, depreciation, amortization and share-based compensation (Adjusted EBITDA) was a loss of $0.7 million in the first quarter of 2022, compared to $11.1 million in the same period last year.
- Cash and short-term marketable securities as of March 31, 2022, were $66.3 million. Inventory as of March 31, 2022, was $105.9 million and prepaid inventory and other current assets were $7.0 million.
- Total current liabilities, including accounts payable and accrued payroll and other liabilities, decreased from $47.1 million on December 31, 2021, to $36.6 million on March 31, 2022.
Fiscal 2022 Financial Outlook
Revenue guidance for 2022 is updated to be between $340 to $400 million, down from a range of $415 million to $445 million expected previously.
Adjusted EBITDA guidance is expected to be between zero and $10 million, down from previous expectations of $30 million to $35 million.
The firm expects to add 10-15 new stores this year, down from the previous target of 15-20 new stores.
M&A Activity And Expansion Efforts
In January 2022, the Company opened its sixth Oklahoma location in Ardmore. The Company relocated two retail stores into multi-channel operations that will serve as fulfillment centers, including a 25,000 square feet location in Phoenix, Arizona, and a 58,000 square feet location in Medley, Florida.
In February 2022, the Company acquired the assets of Horticultural Rep Group, Inc., a specialty marketing and sales organization of horticultural products based in Ogden, Utah, for $13.4 million.