GrowGeneration Announces Second Quarter 2024 Preliminary Results, Strategic Restructuring Plan and Outlines Path to Profitability

Rhea-AI Summary

GrowGeneration Corp. (NASDAQ: GRWG) announced preliminary Q2 2024 results and a strategic restructuring plan. Key points:

• Q2 net revenue expected to exceed $53 million, up 10.6% from Q1
• Restructuring plan aims to generate $12 million in savings over 12 months
• Focusing on proprietary brands, targeting 35% of total sales by end of 2025
• Launching B2B e-commerce portal in Q4 2024
• Closing 19 underperforming stores, reducing to 31 operational stores
• Streamlining operations and rationalizing SKU count

The plan aims to improve profitability, drive higher margins, and position GrowGen for future growth in the hydroponics and organic gardening supply industry.

Positive

• Q2 2024 net revenue expected to exceed $53 million, a 10.6% increase from Q1
• Restructuring plan projected to generate $12 million in savings over 12 months
• Targeting proprietary brands to account for 35% of total sales by end of 2025
• Launching B2B e-commerce portal in Q4 2024 to enhance digital transformation
• Streamlining operations expected to reduce expenses and improve profitability

Negative

• Closing 19 redundant or underperforming stores, reducing total store count to 31
• Potential short-term disruption due to comprehensive restructuring efforts
• Possible loss of some walk-in customers due to store closures

Insights

Financial Analyst

GrowGeneration’s preliminary results and restructuring plan signal a significant shift towards profitability. The expected net revenue of $53 million for Q2 2024 marks a notable 10.6% increase from the previous quarter, indicating strong performance. The comprehensive restructuring plan, aiming for $12 million in savings, will likely bolster margins and profitability. The focus on proprietary brands, expected to contribute 35% of total sales by the end of 2025, suggests a strategic direction towards higher-margin products.

The closure of 19 underperforming stores and the shift to an enhanced B2B e-commerce platform should streamline operations and reduce costs. By retaining the majority of commercial customers through adjacent locations and the new B2B portal, GrowGeneration is well-positioned to maintain its market share while improving operational efficiency. Investors should monitor the execution of these plans closely, as successful implementation could lead to substantial financial benefits.

Market Research Analyst

GrowGeneration’s strategic emphasis on proprietary brands and B2B e-commerce reflects broader market trends towards digitization and brand differentiation. Launching brand-specific websites and expanding their proprietary products lineup aligns with consumer preferences for specialized and exclusive products. The new B2B e-commerce portal, set to launch in Q4 2024, will likely cater to the increasing demand for online transactions in the commercial sector, offering convenience and improved customer experience.

Closing underperforming stores and reducing SKU count are prudent moves to optimize the retail footprint and enhance supply chain efficiency. By targeting cost reductions and margin improvements, GrowGeneration is positioning itself to withstand market volatility and capitalize on growth opportunities within the hydroponics and organic gardening sectors. This strategic pivot should appeal to investors looking for long-term growth and sustainability.

Tech Expert

The digital transformation initiatives at GrowGeneration, including the launch of a B2B e-commerce portal, represent a pivotal advancement in their operational strategy. E-commerce platforms offer scalability, better data analytics and improved customer accessibility, which can drive higher sales and efficiency. By migrating transactional activity from brick-and-mortar to digital, GrowGeneration can reduce overhead costs and leverage technology to optimize their supply chain and inventory management.

The fulfillment strategy, allowing commercial customers to shop online and pick up from warehouse-style stores, combines the best aspects of online and physical retail. This hybrid model is increasingly popular and can significantly enhance customer satisfaction and loyalty. The company’s proactive approach to digital innovation will likely strengthen its competitive edge and support its growth trajectory.

Second Quarter net revenue expected to be over $53 million, a sequential increase of at least 10.6% quarter-over-quarter

Fundamentally repositions the Company to deliver growth and expected to generate approximately $12 million in savings over the next 12 months

DENVER--(BUSINESS WIRE)-- GrowGeneration Corp. (NASDAQ: GRWG) (“GrowGen” or the “Company”), one of the largest retailers and distributors of specialty hydroponic and organic gardening products in the United States, today announced certain preliminary unaudited results for the second quarter 2024. Second quarter 2024 net revenue is expected to be over $53 million, a sequential increase of at least 10.6% compared to $47.9 million in the prior quarter.

The Company also announced a comprehensive restructuring plan focused on long-term profitability and advancing growth initiatives in key areas such as proprietary brands, B2B, and e-commerce. The strategic plan will include improvements in inventory management, sales and marketing activities, and other aspects of operations, and is expected to generate margin gains and approximately $12 million in cost savings realized over the next 12 months.

Focus on Proprietary Brands:

• Targeting proprietary brands to account for 35% of total sales by end of 2025.
• Continue to launch e-commerce enabled, brand-specific websites. The Harvest Company e-commerce enabled website went live already and is available at www.theharvestco.com.
• Add approximately 50 new products to the proprietary brands lineup over the next 12 months.

Digital Transformation and B2B Customer Focus:

• Launch a B2B e-commerce portal, migrating transactional activity from brick-and-mortar to this digital platform. The Company expects to launch the platform in Q4 this year.
• Implement a fulfillment strategy where commercial customers will shop online and have access to products at existing warehouse-style stores for convenient pickup.

Streamlining Operations:

• Right size the Company’s national retail footprint by closing 19 redundant or underperforming stores, 7 of which were closed in the first half of 2024. The remainder are expected to be substantially completed within the next 90 days. Following the closure of the 19 stores in 2024, the Company will have 31 operational stores going forward.
• Retain the majority of commercial customers and direct walk-in customers through adjacent locations, commercial sales force, and B2B portal.
• Reorganize sales, marketing, and administrative activities to reduce expenses while seeking efficiencies to drive sales and conduct operations more cost effectively.
• Rationalize SKU count, enhance strategic vendor relationships, and improve recovery of freight expense.
• These actions are expected to reduce expenses by approximately $12 million year-over-year, drive higher margins, and improve profitability.

“During the second quarter, we continued to see sales growth driven by our commercial customers. We believe GrowGen can better serve these customers and extend our market reach by emphasizing our proprietary brands and launching an enhanced B2B e-commerce platform,” said Darren Lampert, GrowGen’s Co-Founder and Chief Executive Officer. “We intend to rapidly align our operating model, sales, and cost structures accordingly to achieve these goals, drive higher margins, and boost profitability. We are committed to implementing these changes swiftly and effectively, ensuring that GrowGen remains a leader in the hydroponics and organic gardening supply industry and well-positioned to expand into other markets in the future.”

About GrowGeneration Corp.:

GrowGen is a leading developer, marketer, retailer, and distributor of products for both indoor and outdoor hydroponic and organic gardening, as well as customized storage solutions. GrowGen carries and sells thousands of products, such as nutrients, additives, growing media, lighting, environmental control systems, and benching and racking, including proprietary brands such as Charcoir, Drip Hydro, Power Si, Ion lights, The Harvest Company, and more. Incorporated in Colorado in 2014, GrowGen manages a chain of specialty retail hydroponic and organic garden centers in the United States. The Company also operates an online superstore for cultivators at growgeneration.com, as well as a wholesale business for resellers, HRG Distribution, and a benching, racking, and storage solutions business, Mobile Media or MMI.

To be added to the GrowGeneration email distribution list, please email GrowGen@kcsa.com with GRWG in the subject line.

Forward Looking Statements:

This press release may include predictions, estimates or other information that might be considered forward-looking within the meaning of applicable securities laws. While these forward-looking statements represent current judgments, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect opinions only as of the date of this release. Please keep in mind that the Company does not have an obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. When used herein, words such as “look forward,” “expect,” “believe,” “continue,” “building,” or variations of such words and similar expressions are intended to identify forward-looking statements. Factors that could cause actual results to differ materially from those contemplated in any forward-looking statements made by us herein are often discussed in filings made with the United States Securities and Exchange Commission, available at: www.sec.gov, and on the Company’s website, at: www.growgeneration.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240722405033/en/

KCSA Strategic Communications

Philip Carlson

Managing Director

T: 212-896-1233

E: GrowGen@kcsa.com

Source: GrowGeneration Corp.

FAQ

What is GrowGeneration's expected Q2 2024 revenue?

GrowGeneration (GRWG) expects Q2 2024 net revenue to exceed $53 million, representing a sequential increase of at least 10.6% compared to $47.9 million in the previous quarter.

How many stores will GrowGeneration (GRWG) close in its restructuring plan?

GrowGeneration plans to close 19 redundant or underperforming stores, 7 of which were closed in the first half of 2024. The remaining closures are expected to be completed within 90 days, leaving the company with 31 operational stores.

What are the key elements of GrowGeneration's (GRWG) strategic restructuring plan?

GrowGeneration's strategic plan includes focusing on proprietary brands, launching a B2B e-commerce portal, streamlining operations, closing underperforming stores, reorganizing sales and marketing activities, and rationalizing SKU count. The plan aims to generate $12 million in savings over 12 months and improve profitability.

When will GrowGeneration (GRWG) launch its B2B e-commerce portal?

GrowGeneration expects to launch its B2B e-commerce portal in Q4 2024, which will allow commercial customers to shop online and have access to products at existing warehouse-style stores for convenient pickup.