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GrowGeneration (GRWG) Q4 Earnings Miss, Revenues Down Y/Y
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GrowGeneration Corp. (GRWG - Free Report) reported a loss per share of 25 cents in the fourth quarter of 2022, wider than the Zacks Consensus Estimate of a loss of 9 cents per share. The company reported a loss per share of 7 cents in the fourth quarter of 2021. The results reflect the ongoing weakness in the cannabis industry, the company’s inventory clearance measures and recognition of obsolete inventory.
GrowGeneration generated revenues of $54 million in the quarter under review, which declined 40% year over year, highlighting the weak industry demand. The top line however beat the Zacks Consensus Estimate of $50.6 million. Comparable store sales in the quarter plunged 52% from the prior year.
The cost of sales declined 33.5% year on year to $44.9 million in the quarter. Gross profit slumped 59% year over year to $9.6 million due to aggressive inventory clearance and an increase in inventory reserves. The gross margin was 17.6% in the quarter under review compared with 25.5% in the prior-year quarter.
Store operating costs were $12.8 million compared with $14.1 million in the prior-year quarter. Selling, general, and administrative expenses were down 24% year on year to $8.6 million in the quarter under review. Adjusted EBITDA was a loss of $10.2 million in the quarter against the prior-year quarter’s loss of $1.7 million. The loss in the quarter under review was a result of $1 million in expenses associated with the closure of Las Vegas, Compton, and Cotati locations and nearly $4 million associated with inventory cleanup measures.
Financial Position
At the end of 2022, GrowGeneration had cash and short-term marketable securities of $72 million. Inventory was $77 million, and prepaid and other current assets were $6.45 million at 2022-end. Total current liabilities, including accounts payable and accrued payroll and other liabilities, were $36 million at the end of 2022.
On Nov 3, 2022, GRWG acquired certain assets of St. Louis Hydroponic Company, a hydroponic retail store in St. Louis, MO. The company closed eight stores and opened five new stores throughout the year.
2022 Results
GrowGeneration incurred a loss per share of $2.69 in 2022, wider than the Zacks Consensus Estimate of a loss of $2.59 per share. The company reported earnings per share of 21 cents in 2021.
GrowGeneration generated revenues of $279 million in 2022, which declined 34% year over year but surpassed the Zacks Consensus Estimate of $274.4 million
2023 Guidance
Considering the ongoing weakness in the broader cannabis and hydroponic industries, GRWG has been right-sizing its cost structure, lowering inventory and consolidating its store footprint. The company expects its margins to benefit from cost savings stemming from store consolidations, reduced payroll expenses, declining ocean freight rates and reduced headwinds from inventory discounting. The favorable mix impact from a greater proportion of private label and proprietary brand sales is also expected to favor results.
The company expects to deliver sequential improvement in revenues in the first quarter of 2023 for the first time in seven quarters. It also projects sequential growth in the rest of the quarters of the year. Margins are expected to normalize in the first quarter and for the balance of the year. First-quarter 2023 net revenues are projected in the range of $55 million to $57 million. Adjusted EBITDA loss is expected between $2 million and $4 million.
GrowGeneration expects revenues between $250 million and $270 million in 2023. Full-year adjusted EBITDA is expected to come within negative $4 million to a positive $1 million.
Price Performance
Image Source: Zacks Investment Research
In the past year, GrowGeneration’s shares have slumped 52.6% against the industry’s 9.8% decline.
Zacks Rank & Stocks to Consider
GrowGeneration currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks worth considering in the basic materials space include Steel Dynamics Inc. (STLD - Free Report) , Olympic Steel Inc. (ZEUS - Free Report) and Nucor Corporation (NUE - Free Report) .
Steel Dynamics currently sports a Zacks Rank #1 (Strong Buy). STLD’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 11.3% on average. STLD has rallied around 23.2% in a year.
Olympic Steel currently sports a Zacks Rank of 1. ZEUS’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 26.2% on average. ZEUS has rallied around 51.7% in a year.
Nucor currently carries a Zacks Rank #2 (Buy). NUE’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 7.7% on average. NUE has rallied around 20.5% in a year.
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GrowGeneration (GRWG) Q4 Earnings Miss, Revenues Down Y/Y
GrowGeneration Corp. (GRWG - Free Report) reported a loss per share of 25 cents in the fourth quarter of 2022, wider than the Zacks Consensus Estimate of a loss of 9 cents per share. The company reported a loss per share of 7 cents in the fourth quarter of 2021. The results reflect the ongoing weakness in the cannabis industry, the company’s inventory clearance measures and recognition of obsolete inventory.
GrowGeneration generated revenues of $54 million in the quarter under review, which declined 40% year over year, highlighting the weak industry demand. The top line however beat the Zacks Consensus Estimate of $50.6 million. Comparable store sales in the quarter plunged 52% from the prior year.
The cost of sales declined 33.5% year on year to $44.9 million in the quarter. Gross profit slumped 59% year over year to $9.6 million due to aggressive inventory clearance and an increase in inventory reserves. The gross margin was 17.6% in the quarter under review compared with 25.5% in the prior-year quarter.
Store operating costs were $12.8 million compared with $14.1 million in the prior-year quarter. Selling, general, and administrative expenses were down 24% year on year to $8.6 million in the quarter under review. Adjusted EBITDA was a loss of $10.2 million in the quarter against the prior-year quarter’s loss of $1.7 million. The loss in the quarter under review was a result of $1 million in expenses associated with the closure of Las Vegas, Compton, and Cotati locations and nearly $4 million associated with inventory cleanup measures.
Financial Position
At the end of 2022, GrowGeneration had cash and short-term marketable securities of $72 million. Inventory was $77 million, and prepaid and other current assets were $6.45 million at 2022-end. Total current liabilities, including accounts payable and accrued payroll and other liabilities, were $36 million at the end of 2022.
On Nov 3, 2022, GRWG acquired certain assets of St. Louis Hydroponic Company, a hydroponic retail store in St. Louis, MO. The company closed eight stores and opened five new stores throughout the year.
2022 Results
GrowGeneration incurred a loss per share of $2.69 in 2022, wider than the Zacks Consensus Estimate of a loss of $2.59 per share. The company reported earnings per share of 21 cents in 2021.
GrowGeneration generated revenues of $279 million in 2022, which declined 34% year over year but surpassed the Zacks Consensus Estimate of $274.4 million
2023 Guidance
Considering the ongoing weakness in the broader cannabis and hydroponic industries, GRWG has been right-sizing its cost structure, lowering inventory and consolidating its store footprint. The company expects its margins to benefit from cost savings stemming from store consolidations, reduced payroll expenses, declining ocean freight rates and reduced headwinds from inventory discounting. The favorable mix impact from a greater proportion of private label and proprietary brand sales is also expected to favor results.
The company expects to deliver sequential improvement in revenues in the first quarter of 2023 for the first time in seven quarters. It also projects sequential growth in the rest of the quarters of the year. Margins are expected to normalize in the first quarter and for the balance of the year. First-quarter 2023 net revenues are projected in the range of $55 million to $57 million. Adjusted EBITDA loss is expected between $2 million and $4 million.
GrowGeneration expects revenues between $250 million and $270 million in 2023. Full-year adjusted EBITDA is expected to come within negative $4 million to a positive $1 million.
Price Performance
Image Source: Zacks Investment Research
In the past year, GrowGeneration’s shares have slumped 52.6% against the industry’s 9.8% decline.
Zacks Rank & Stocks to Consider
GrowGeneration currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks worth considering in the basic materials space include Steel Dynamics Inc. (STLD - Free Report) , Olympic Steel Inc. (ZEUS - Free Report) and Nucor Corporation (NUE - Free Report) .
Steel Dynamics currently sports a Zacks Rank #1 (Strong Buy). STLD’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 11.3% on average. STLD has rallied around 23.2% in a year.
Olympic Steel currently sports a Zacks Rank of 1. ZEUS’ earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 26.2% on average. ZEUS has rallied around 51.7% in a year.
Nucor currently carries a Zacks Rank #2 (Buy). NUE’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 7.7% on average. NUE has rallied around 20.5% in a year.