GrowGeneration Corp. (NASDAQ:GRWG), a major U.S. retailer of hydroponic and organic gardening products, reported its Q3 2024 financial results Tuesday afternoon with a mixed performance. Net sales declined 10.2% year-over-year, totaling $50 million, down from $55.7 million in the same quarter of 2023.
The drop was driven by the closure of 25 retail locations as part of the company's ongoing restructuring. However, positive momentum was seen in same-store sales, which grew by 12.5%, buoyed by strong commercial sales and robust customer retention.
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Gross Profit And Margins Under Pressure
Gross profit fell by 33.2%, decreasing from $16.2 million in Q3 2023 to $10.8 million in Q3 2024. The gross profit margin also contracted significantly, dropping to 21.6% from 29.1% in the prior year.
The decline was attributed to restructuring activities, including inventory disposal costs and reduced vendor discounts. Despite the margin pressure, proprietary brand sales increased to 23.8% of cultivation and gardening net sales, compared to 19.4% in the same period last year.
Operating Expenses Cut, Net Loss Widens
Operating expenses were reduced by 5.4%, falling to $22.9 million as GrowGeneration continued to streamline its operations through store consolidations and cost-cutting measures.
However, these efforts were not enough to offset the impact of lower sales, as the company reported a net loss of $11.4 million, a widening from the $7.3 million loss in Q3 2023. Adjusted EBITDA also showed a deeper loss of $2.4 million, compared to a $0.9 million loss in the prior year.
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Cash Reserves Strong Despite Strategic Shifts
The company ended the quarter with a solid cash position, reporting $55.2 million, cash equivalents and marketable securities, with no debt.
CEO Darren Lampert highlighted the company's financial stability and strategic progress. "Our actions to date have successfully positioned GrowGen for sustainable growth in 2025. We are tracking well against our goal to increase proprietary brand sales to 35% next year."
The company is gearing up for the launch of its e-commerce platform in Q4 2024, aiming to enhance its digital presence and boost B2B sales. With 19 store consolidations completed in fiscal 2024, GrowGeneration aims to optimize its margins and build a leaner, more profitable operation going forward.
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