• Net Revenue: $50 million for Q3 2024, down from $53.5 million in Q2 2024.
• Same Store Sales Growth: Increased by 12.5%, marking the first positive quarter in three years.
• Proprietary Brand Sales: Grew to 23.8% of cultivation and gardening sales, up from 19.4% last year.
• Gross Profit Margin: 21.6% for Q3 2024, compared to 29.1% in Q3 2023.
• Net Loss: $11.4 million for Q3 2024, or negative 19 per share.
• Adjusted EBITDA: Negative $2.4 million for Q3 2024.
• Cash Position: $55.2 million with no debt as of September 30, 2024.
• Store Closures: Closed 19 stores, retaining 31 operational stores.
• Full Year 2024 Revenue Guidance: Reiterated at $190 to $195 million.

• Warning! GuruFocus has detected 3 Warning Signs with GRWG.

Release Date: November 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• GrowGeneration Corp (NASDAQ:GRWG) achieved a 12.5% increase in same-store sales, marking the first positive growth in three years.
• The company successfully closed 19 underperforming stores as part of its restructuring plan, focusing on higher-performing locations.
• Proprietary brand sales grew to 23.8% of total sales, up from 19.4% last year, driven by new product launches.
• The company maintained a strong cash position with $55.2 million and no debt as of September 30, 2024.
• GrowGeneration Corp (NASDAQ:GRWG) is launching a B2B e-commerce portal to enhance customer experience and streamline operations.

Negative Points

• Net revenue for the third quarter was $50 million, a decline from $55.7 million in the same period last year, primarily due to store closures.
• Gross profit margin decreased to 21.6% from 29.1% in the previous year, impacted by inventory costs and store liquidation sales.
• The company reported a net loss of $11.4 million for the third quarter, compared to a net loss of $7.3 million in the same period last year.
• Adjusted EBITDA was negative $2.4 million, worsening from negative $0.9 million in the previous year.
• The restructuring process, including store closures and inventory adjustments, is expected to continue impacting margins into the fourth quarter.

Q & A Highlights

Q: Can you remind us about the ongoing rationalization of the store base and when it will be completed? A: Darren Lampert, CEO: We currently have 31 stores, down from about 65. We've closed 19 stores this year and 25 year-over-year. We're comfortable with 31 stores but may close a few more next year. GrowGen is now a go-to name for cultivators, and we don't need as many stores as we build out distribution and our B2B network.

Q: How is the performance of new proprietary brands compared to legacy brands? A: Darren Lampert, CEO: We've spent the last three years on R&D and testing products. Our proprietary brands are seeing adoption, and we're selling into distribution. We expect 35% of sales next year to be from proprietary brands, which have higher margins than other products.

Q: Can you provide more details on efforts to build out the commercial business and sales with larger players? A: Greg Sanders, CFO: There's a tremendous opportunity as the industry evolves. GrowGen is a go-to for accounting, credit, product, and distribution. We have a strong balance sheet, $55 million in cash, and the largest inventory positions in the industry. Our commercial team is highly talented and works closely with customers.

Q: What is the expected impact of the B2B portal on margins and revenue? A: Greg Sanders, CFO: The B2B portal will provide individual pricing and availability, reducing manual processes and freeing up staff to focus on customer service. It should increase margins by optimizing inventory and shipping. We expect it to be a significant part of GrowGen 2.0.

Q: How is customer retention from closed stores impacting same-store sales? A: Greg Sanders, CFO: We've retained a majority of commercial customers, which has contributed to a 12.5% increase in same-store sales. We're seeing a small turn in the industry and expect continued growth as we complete restructuring by the end of the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.