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GrowGeneration Acquires Arizona Retailer Hydroponics Depot

By Eric Volkman – Oct 12, 2020 at 7:18PM

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This is the company's first asset purchase in the state.

GrowGeneration (GRWG 5.53%) is growing the old-fashioned way -- by acquiring a peer company.

That peer is Hydroponics Depot, which the company announced on Monday it has purchased. GrowGeneration characterizes its new asset as the biggest indoor and outdoor garden products retailer in Phoenix. It marks the Colorado-based company's first acquisition in Arizona. GrowGeneration did not specify the price or terms of the deal.

According to the company, Hydroponics Depot has posted year-to-date sales of over $50 million. That represents year-over-year growth exceeding 50%.

U.S. currency in the shape of a marijuana leaf.

Image source: Getty Images.

Owning Hydroponics Depot increases GrowGeneration's count of retail stores, which now stands at 29. These are located in 11 states throughout the country.

It is not known whether Hydroponics Depot will be rebranded.

GrowGeneration touted the timing of its buy and the potential it holds for continued growth. The company pointed out in the press release heralding the acquisition that Arizona is one of the most vibrant markets in the U.S. for medical marijuana -- recreational sale and consumption is still illegal there, for the moment. It said that sales of such products rose 20% year over year from January to May this year.

All told, wrote GrowGeneration, total sales of medical marijuana in the state should hit $700 million to $900 million in 2020. This is the tip of the iceberg if Arizona voters approve Proposition 207, a November ballot initiative that, if passed, would fully approve cannabis use -- and even cultivation, to some extent -- by those 21 and older.

Despite the optimistic pronouncements and the new asset, investors bid GrowGeneration stock down on Monday. It fell by nearly 2.2% on the day, contrasting with the gains of numerous fellow marijuana stocks and the rise of the S&P 500 index.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends GrowGeneration. The Motley Fool has a disclosure policy.

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