GrowGeneration Corp. GRWG reported a loss per share of 14 cents in the second quarter of 2022, wider than the Zacks Consensus Estimate of a loss of 8 cents per share. The company reported earnings per share of 11 cents in the second quarter of 2021. The quarterly results reflect the ongoing weakness in the cannabis industry.
GrowGeneration generated revenues of $71 million in second-quarter 2022, which declined 43.5% year over year, highlighting the weak industry demand. The top line missed the Zacks Consensus Estimate of $83.8 million. Comparable store sales in the quarter plunged 57% from the prior year at its 58 retail locations and e-commerce operations. This was somewhat negated by contributions from acquisitions and the addition of new stores.
E-commerce revenues (including growgeneration.com and Agron revenues) in the quarter under review were $3.7 million, down from $12 million in the last-year quarter. Revenues from non-retail operations rose to $12 million in the quarter from $5 million last year.
Cost of sales declined 44% year on year to $50.9 million in the quarter. Gross profit slumped 43% year over year to $20.2 million. Gross margin was 28.5% in the quarter under review compared with 28.4% in the prior-year quarter.
Store operating costs were $13.8 million compared with $12.6 million in the prior-year quarter, owing to the increase in store locations, somewhat negated by GRWG’s cost reduction actions. Selling, general, and administrative expenses were flat year on year at $10.6 million in the quarter under review. Adjusted EBITDA was a loss of $2.9 million in the quarter against the prior-year quarter’s $14.5 million.
At the end of the second quarter of 2022, GrowGeneration had cash and short-term marketable securities of $65.6 million. Inventory was $99.1 million, and prepaid inventory and other current assets were $9.2 million at the quarter-end. Total current liabilities, including accounts payable and accrued payroll and other liabilities, were $39.5 million at the quarter’s end.
2022 Guidance Lowered
GrowGeneration anticipates the ongoing revenue and gross profit headwinds to intensify in the back half of the year. Despite the weak demand faced by the industry currently, GRWG believes that the long-term prospect of hydroponics remains intact. Meanwhile, the company is working toward preserving cash through working capital optimization and aggressively right-sizing its cost structure.
GrowGeneration now expects revenues between $250 million and $275 million in 2022. The company had earlier provided guidance of $340 million to $400 million. Full-year adjusted EBITDA guidance is expected to come within a negative $12 million to $15 million, lowered from the prior range of $0 million to $10 million.
GRWG expects to open three to four stores this year, focused on areas where it does not currently have a presence. The company currently has 62 locations across 14 states.
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In the past year, GrowGeneration’s shares have slumped 89.1% against the industry’s rally of 6.7%.
Zacks Rank & Stocks to Consider
GrowGeneration currently has a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the basic materials space include Cabot Corporation CBT, Sociedad Quimica y Minera de Chile S.A. SQM and Albemarle Corporation ALB.
Cabot, which currently sports a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 22.5% for the current fiscal year. The Zacks Consensus Estimate for CBT's earnings for the current fiscal has been revised 0.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 16.2%. CBT has gained around 37% over a year.
Sociedad has a projected earnings growth rate of 513.7% for the current year. The Zacks Consensus Estimate for SQM’s current-year earnings has been revised 57.8% upward in the past 60 days.
Sociedad’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, while missing in the other two quarters. the average being 28.2%. SQM has soared roughly 99% in a year. The company flaunts a Zacks Rank #1.
Albemarle has a projected earnings growth rate of 247% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 7.8% upward in the past 60 days.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 20%. ALB has gained roughly 7% in a year. The company carries a Zacks Rank #2 (Buy).
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