GrowGeneration NASDAQ: GRWG reported higher first-quarter 2026 revenue and a narrower loss, with management pointing to commercial business momentum, proprietary brand growth and contributions from its storage solutions segment as key drivers.
On the company’s earnings call, Co-Founder and Chief Executive Officer Darren Lampert said the quarter reflected “continued progress” in transforming the business into a more focused and efficient operation. He said first-quarter revenue exceeded the company’s expectations despite the period typically being GrowGeneration’s seasonally slowest quarter.
“Our first quarter results reflect continued progress, highlighted by our second consecutive quarter of year-over-year growth, improving profitability and continued expansion of our proprietary brand mix,” Lampert said.
Revenue rises as commercial business leads growth
Chief Financial Officer Greg Sanders said GrowGeneration reported net sales of $38.4 million for the first quarter, up 7.5% from $35.7 million in the same period last year. He said the increase was led by the company’s commercial B2B business.
Net sales in the cultivation and gardening segment totaled $31.9 million, compared with $30.9 million in the prior-year period. Proprietary brand sales represented 37% of cultivation and gardening revenue, up from 32% a year earlier.
Sanders said that shift reflects management’s effort to grow higher-margin proprietary products, which the company views as a key component of its margin expansion and long-term profitability strategy.
Lampert said the company is seeing increased adoption of proprietary brands including Char Coir and Drip Hydro as commercial customers standardize around recurring consumable programs. He also said GrowGeneration continues to reposition its legacy retail footprint into commercial sales and service centers, allowing its technical sales team to support larger commercial accounts more efficiently.
GrowGeneration’s storage solutions segment posted net sales of $6.5 million, up from $4.8 million in the first quarter of 2025. Lampert said revenue in the segment rose 35.5% year over year, while Sanders said the segment benefited from increasing capital investment across a broader range of end markets, including infrastructure, automation and facility expansion.
Profitability improves, though gross margin declines
Gross profit was $9.7 million, unchanged from the prior-year quarter. Total company gross margin declined to 25.4% from 27.2% a year earlier.
Sanders attributed the decline in cultivation and gardening gross profit primarily to inventory-related charges tied to four store closures and a higher mix of lower-margin durable products. He said that, excluding those factors, margins would have been generally in line with the prior year.
The storage solutions segment helped offset some of that pressure. Sanders said the segment’s gross margin improved by 200 basis points to 39.6%, driving a 42.7% increase in gross profit dollars.
Operating costs declined sharply. Store and other operating expenses fell 27.2% to $6.4 million from $8.8 million in the prior-year period. Selling, general and administrative expenses declined 2.6% to $6.9 million. Total operating expenses fell 23.4% to $15 million from $19.6 million.
GAAP net loss improved to $4.9 million, or 8 cents per share, compared with a net loss of $9.4 million, or 16 cents per share, in the same quarter last year. Adjusted EBITDA was a loss of $1.6 million, compared with a loss of $4 million a year earlier.
Company maintains full-year outlook
GrowGeneration ended the quarter with $41.1 million in cash, cash equivalents and marketable securities, and no debt. Sanders said the company’s balance sheet provides flexibility to execute on strategic priorities while maintaining discipline in capital allocation.
During the first quarter, the company’s board authorized a share repurchase program of up to $10 million. Sanders said management intends to execute the program opportunistically, depending on market conditions, capital allocation priorities and securities laws.
The company reaffirmed its full-year 2026 guidance for net revenue of $162 million to $168 million and approximately break-even adjusted EBITDA. For the second quarter, management expects net revenue of $42 million to $44 million and a return to positive adjusted EBITDA.
Sanders said the company expects gross margin to return to a 27% to 29% range in the second quarter and sees fewer store closures affecting results over the remainder of the year. Lampert added that private-label brands are growing faster than expected and said he believes proprietary brand penetration could move into the 40% range before the fourth quarter.
Management cites cannabis regulatory tailwind
Lampert also discussed the regulatory backdrop, saying an April 22 order moving state-licensed medical cannabis to Schedule III of the Controlled Substances Act would provide immediate 280E tax relief to qualifying operators. He described the development as a “meaningful tailwind” for GrowGeneration’s customers.
In response to a question from Alliance Global Partners analyst Aaron Grey, Lampert said GrowGeneration is seeing increased activity in customer projects involving lighting, dehumidification and facility infrastructure.
“We haven’t been this active since 2021 on bidding out lighting, dehumidification and infrastructure for facilities,” Lampert said. He added that many customer facilities need refurbishment and said improved customer balance sheets could support additional spending on cultivation infrastructure.
Oppenheimer analyst Brian Nagel asked whether the increase in buildout activity was tied to rescheduling or other factors. Lampert said it reflected a combination of delayed facility refurbishments, balance sheet management by operators and expectations that rescheduling could return significant cash to the industry.
Lampert also said supply and demand in the cannabis market appears to be moving toward balance, referencing commentary from multi-state operators and discussions around potential exports to European markets. He said GrowGeneration is positioned to benefit from equipment demand as the industry matures.
Store closures, inventory and tariffs affect margins
Lake Street analyst Mark Smith asked about inventory tied to closed locations and its effect on margins. Sanders said the four store closures in the first quarter had an estimated 1.5 percentage point impact on gross margin, including discarded inventory, liquidation activity, freight and inventory movement costs.
Sanders said the company does not expect as many closures in the next three quarters combined as it had in the first quarter, and he does not expect the same level of impact through the remainder of 2026.
Lampert also cited tariff pressure in the quarter, including on Char Coir, which he described as one of the company’s largest internal products. He said GrowGeneration dealt with 50% tariffs in the first quarter and expects that impact to begin dissipating as new product comes into the company.
Sanders said GrowGeneration is pursuing potential refunds related to IEEPA tariffs but said it was too early to comment on the possible impact.
Lampert closed the call by saying the company remains focused on expanding its commercial platform, growing higher-margin proprietary brand sales, driving operating leverage and maintaining disciplined execution across the organization.
About GrowGeneration NASDAQ: GRWG
GrowGeneration Corp. is the largest chain of specialty hydroponic and organic garden centers in the United States, serving commercial and home growers of all experience levels. The company offers a broad assortment of cultivation supplies, including high-efficiency LED lighting, climate control systems, irrigation and fertigation equipment, growing media and nutrients. Through its retail outlets and e-commerce platform, GrowGeneration caters to indoor and outdoor horticultural operations, with a particular focus on the rapidly expanding legal cannabis market.
In addition to its product offerings, GrowGeneration provides design, consulting and project management services for turnkey cultivation facilities.
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