GrowGeneration, one of the largest U.S. retailers and distributors of specialty hydroponic and organic gardening products, has announced its financial results for the second quarter ended June 30, 2024.
Q2 2024 Highlights:
- Net Sales: Rose 11.8% quarter-over-quarter to $53.5 million.
- Proprietary Brand Sales: Increased to 21.5% of Cultivation and Gardening net sales, up from 16.7% in the same period last year.
- Gross Profit Margin: Improved to 26.9%, a 110 basis point increase from the previous quarter and up from 26.8% in Q2 2023.
- Operating Expenses: Decreased by $2.5 million to $20.9 million.
- Net Loss: Reduced to $5.9 million, a $2.9 million improvement sequentially.
- Adjusted EBITDA: Loss of $1.1 million, showing a $1.7 million sequential improvement.
- Cash Position: $56.0 million in cash, cash equivalents, and marketable securities, with no debt.
Darren Lampert, Co-Founder and CEO of GrowGeneration, commented, “We are pleased with our second quarter results, reflecting notable progress in key areas. We achieved an 11.8% increase in net revenue and improved our gross margin to 26.9%. Proprietary brand sales rose significantly to 21.5% of net sales, demonstrating the effectiveness of our strategic initiatives. We are confident that our comprehensive restructuring plan, which focuses on proprietary brands, digital sales transformation, and operational streamlining, will enhance profitability and revenue growth. Additionally, we are optimistic about recent federal cannabis reform developments that could benefit our business and customers.”
Q2 2024 Financial Details:
Net sales decreased by 16.3% year-over-year to $53.5 million, down from $63.9 million in Q2 2023. The decline was primarily due to the consolidation of 12 retail locations and the closure of 7 stores in the first half of 2024. Same-store sales fell by 6.2%, impacted by reduced e-commerce and in-store sales.
Proprietary brand sales as a percentage of net sales increased to 21.5%, up from 16.7% the previous year. Consumable product sales also rose to 73.0% of net sales, driven by increased adoption of proprietary products.
In the Storage Solutions segment, net sales of commercial fixtures fell by 11.3% to $7.4 million, attributed to project delays.
Gross profit decreased to $14.4 million, a 15.8% decline from the previous year, mainly due to reduced sales volume and store consolidations. The gross profit margin improved slightly to 26.9%, with the Storage Solutions segment seeing a margin increase to 46.9%, offset by a decrease in the Cultivation and Gardening segment.
Operating expenses for the quarter were $10.2 million, a 15.0% reduction from last year, and selling, general, and administrative expenses were down by 5.3% to $7.1 million.
The GAAP net loss was $5.9 million, or $0.10 per diluted share, compared to $5.7 million or $0.09 per diluted share in Q2 2023. Adjusted EBITDA was a loss of $1.1 million, compared to a gain of $0.9 million the previous year.
Cash, cash equivalents, and marketable securities totaled $56.0 million as of June 30, 2024. Inventory stood at $60.6 million, and total current liabilities were $29.2 million.
Geographical Footprint:
GrowGeneration’s Cultivation and Gardening segment covers 879,000 square feet of retail and warehouse space across 43 locations in 18 states. The company consolidated 7 stores in the first half of 2024 and plans to close an additional 12 stores in the second half of 2024 as part of its restructuring plan, reducing the number of stores to 31.
Fiscal Year 2024 Outlook:
Due to the ongoing restructuring, GrowGeneration expects full-year 2024 net sales to range between $190 million and $195 million. The company will provide updated Adjusted EBITDA guidance later as it assesses the impact of the restructuring.
Footnotes:
(1) Adjusted EBITDA excludes certain items from U.S. GAAP and is presented as a non-GAAP measure. For further details and reconciliation, see the Use of Non-GAAP Financial Information section.
(2) Sales and Adjusted EBITDA guidance include acquisitions and store openings completed in 2024 and 2023 but exclude any unannounced acquisitions.
