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Why Investors Loved GrowGeneration's Q1 Update

By Keith Speights - May 13, 2021 at 6:05AM

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The hydroponics and organic gardening retailer reported impressive sales growth and raised its full-year guidance.

At one point in early February, shares of GrowGeneration (GRWG -5.71%) were up more than 60% year to date. It's been a wild ride for investors since then, with the stock giving up all of those gains.

However, GrowGeneration could be poised for a rebound. The hydroponics and organic gardening retailer announced its first-quarter results after the market closed Wednesday. The ancillary marijuana stock jumped close to 7% in after-hours trading. Here are the highlights from GrowGeneration's Q1 update.

A marijuana leaf.

Image source: Getty Images.

By the numbers

GrowGeneration reported revenue in the first quarter of $90 million, a 173% year-over-year jump. This result blew past the average analysts' revenue estimate of $87.14 million.

The company announced net income in the first quarter of $6.1 million, or $0.10 per share, based on generally accepted accounting principles (GAAP). The consensus analysts' estimate projected earnings of $0.07 per share. In the prior-year period, GrowGeneration posted a GAAP loss of $2.1 million, or $0.06 per share. 

GrowGeneration recorded adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $11.1 million, or $0.18 per share. In the prior-year period, the company's adjusted EBITDA totaled $2.4 million, or $0.06 per share.

Behind the numbers

Same-store sales at the 22 locations open in the first quarter and the prior-year period soared 51% year over year to $43 million. GrowGeneration also added 15 new retail locations during Q1, bringing its total number of stores to 53.

Private-label products, including the Power Si and Char Coir brands, continue to become an increasingly important part of GrowGeneration's business. Sales for these products made up 6.2% of total revenue in the first quarter of 2021 compared to less than 1% in the prior-year period.

GrowGeneration's online operations also made significant progress. E-commerce sales totaled $4.4 million in Q1, up 126% year over year.

All of these gains were even more impressive because of some of the challenges the company faced. GrowGeneration CEO Darren Lampert specifically pointed out port delays and supply chain interruptions in his comments in the company's Q1 press release.

Looking ahead

GrowGeneration upped its guidance for full-year 2021. The company now expects revenue of between $450 million and $470 million -- more than double its sales last year. It also projects adjusted EBITDA of between $54 million and $58 million.

Several developments since the end of the first quarter should help boost sales later in the year. In April, GrowGeneration acquired Downriver Hydroponics, a Michigan garden center. It leased a facility in Jackson, Mississippi, to expand into the new Mississippi medical cannabis market. GrowGeneration also announced earlier this month that it's building a sixth location in Oklahoma.

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

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