GrowGeneration (GRWG) Q4 Earnings Growth, Revenues Improve Year-over-Year

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Grow Generation Corp. GRWG reported a loss per share of 7 cents in the fourth quarter of 2021, narrower than Zacks’ consensus estimate of a loss of 8 cents per share. The company had reported earnings per share of 3 cents in the fourth quarter of 2020. The quarterly results reflect continued weakness in the cannabis industry. The supply/demand imbalance in California and other western states caused by the huge oversupply of outdoor cannabis has put pressure on cannabis prices. Additionally, slower-than-expected federal legalization has weighed on the industry.

GrowGeneration generated $91 million in revenue in Q4 2021, up 46% year-over-year. The top line topped Zacks’ consensus estimate of $89.2 million. Comparable store sales in the quarter decreased 12.3% from a year ago.

E-commerce revenue, including Agron revenue, in the quarter under review was $7.7 million, compared to $3.2 million in the year-ago quarter. Private label and proprietary products contributed approximately 7.5% to overall sales in the fourth quarter, compared to 0.5% in the prior year quarter.

Cost of sales jumped 47% year-on-year to $67.5 million in the quarter. Gross profit rose 45% year-over-year to $23 million, driven by higher revenue. Gross margin was 25.5% in the fourth quarter, a contraction of 30 basis points year-over-year.

Store operating costs were $14 million, compared to $6 million in the prior year quarter. Selling, general and administrative expenses jumped 101% to around 12 million in the quarter under review. Adjusted EBITDA was a loss of $1.9 million in the reported quarter compared to a positive profit of $5.5 million in the prior year quarter.

Financial situation

At the end of 2021, GrowGeneration had cash and cash equivalents of $41.4 million, compared to $178 million at the end of 2020. GRWG had $39.8 million in marketable securities. Long-term debt was $66 million as of December 31, 2021, compared to $158 million as of December 31, 2020.

Procurement activity

GrowGeneration purchased the assets of Indoor Store, LLC (All Seasons Gardening), an indoor-outdoor garden supply center specializing in hydroponic systems, lighting and nutrients, in October 2021. All Seasons Gardening is the largest New Mexico hydroponics retailer.

On December 31, 2021, GRWG purchased the assets of Mobile Media, Inc and MMI Agriculture, a mobile shelving facility. On January 31, 2022, the company completed the acquisition of Horticultural Rep Group, a horticultural marketing and sales organization based in Ogden, UT.

2021 results

GrowGeneration’s 2021 earnings per share were 21 cents, beating Zacks’ consensus estimate of 20 cents. Sales soared 119% year-over-year to $422.5 billion, beating Zacks’ consensus estimate of $421 billion.

Orientation 2022

GrowGeneration provided revenue forecasts for 2022 between $415 million and $445 million. Adjusted EBITDA guidance for the full year is expected to be between $30 million and $35 million. GRWG plans to open 15-20 locations this year. The company currently has 63 locations in 13 states.

Price performance

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Over the past year, shares of GrowGeneration have fallen 83.5% against a 17.1% rise in the industry.

Zacks Ranking and Stocks to Consider

GrowGeneration currently has a Zacks rank of #4 (selling).

Some higher-ranked stocks in the base materials space include Teak Resources TEAK, Cabot Corporation TCC and Allegheny Technologies Incorporated ATI. All of these stocks currently carry a Zacks rank of #1 (Strong Buy). You can see the full list of today’s Zacks #1 Rank stocks here.

Teck Resources forecasts a profit growth rate of 21.5% for the current fiscal year. The Zacks consensus estimate for TEAK’s current-year earnings has been revised up 28% in the past 60 days.

Teck Resources has beaten the Zacks consensus estimate for earnings in three of the past four quarters and missed once, with the average surprise being 13%. Shares of TECK have jumped about 74% in one year.

Cabot forecasts a 7.6% profit growth rate for the current year. The Zacks consensus estimate for CBT’s current-year earnings has been revised up 8% in the past 60 days.

Cabot beat the Zacks consensus estimate for earnings in each of the last four quarters, with the average surprise coming in at 21.6%. CBT has rallied around 43% in one year.

Allegheny has an expected earnings growth rate of 661.5% for the current year. The Zacks consensus estimate for ATI’s earnings for the current year has been revised up 46% in the past 60 days.

Allegheny has beaten the Zacks consensus estimate for earnings in each of the past four quarters, with the average surprise at 127.2%. ATI appreciated by around 26% over one year.

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