What GrowGeneration (GRWG) Said on Its Q3 Earnings Call

Key Points

• GrowGeneration returned to profitability in Q3, reporting $0.2 million in net income and $2.3 million in adjusted EBITDA, despite sales falling to $44.8 million. Higher margins reflected a $2.6 million tariff-refund benefit and a stronger mix of proprietary brands.
• The company narrowed its 2026 revenue outlook to $163 million–$165 million and because restructuring and store closures make fourth-quarter costs uncertain.
• GrowGeneration is shifting toward commercial customers as it reduces its store count to about 14 by year-end, down from 65 in 2022. It ended the quarter with $41.8 million in cash and marketable securities and no debt.

GrowGeneration NASDAQ: GRWG reported a third-quarter profit helped by tariff refunds and higher sales of its proprietary brands, while withdrawing its full-year adjusted EBITDA forecast as it accelerates store closures and restructuring.

The cultivation supplies company narrowed its 2026 revenue outlook to $163 million to $165 million from $162 million to $168 million. It withdrew its previous adjusted EBITDA guidance of $2 million to $3 million, citing uncertainty around the fourth-quarter impact of closures and other cost-cutting actions.

Chief Financial Officer Greg Sanders said most restructuring actions are expected to be completed in the fourth quarter, although some may extend into the first quarter of 2027. The company plans to provide an update in an 8-K filing once it finalizes its restructuring accounting, he said.

Sales Decline, but Tariff Refund Boosts Profit

Third-quarter net sales fell to $44.8 million from $47.3 million a year earlier. Sanders attributed the decline partly to a few large, one-time transactions in the prior-year period.

Gross profit rose to $14.5 million from $12.9 million, and gross margin expanded to 32.4% from 27.2%. The company recognized a $2.6 million benefit from IEEPA tariff refunds as a reduction in cost of sales. A higher mix of proprietary brand sales also supported margins, Sanders said.

Those gains were partly offset by pricing pressure, higher transportation costs and higher estimated inventory obsolescence costs. Lower sales associated with a smaller store footprint also weighed on gross profit.

GrowGeneration reported net income of $0.2 million, compared with a net loss of $2.4 million a year earlier. Adjusted EBITDA rose to $2.3 million from $1.3 million, marking the company’s second consecutive quarter of positive adjusted EBITDA.

For the first nine months of 2026, adjusted EBITDA was approximately $1 million, compared with a loss of $4 million in the same period a year earlier.

Proprietary Brands Gain Ground

Cultivation and gardening sales declined to $35.6 million from $38.4 million in the third quarter. Within that segment, proprietary brand sales rose 19.3% to $14.4 million and represented 40.6% of segment revenue, up from 31.6% a year earlier.

Through September, proprietary brand sales increased 23.4% to $40.1 million, offsetting a decline in third-party product sales and keeping total cultivation and gardening revenue slightly ahead of the prior year, Sanders said.

Storage Solutions revenue rose to $9.2 million from $8.9 million in the quarter. Sanders said demand from retail and industrial customers contributed to the result, which exceeded expectations. For the first nine months, the segment’s sales rose 10.2% to $24 million.

Store Closures Accelerate

Co-Founder and Chief Executive Officer Darren Lampert said GrowGeneration is shifting from a retail-focused model toward commercial customers. Store traffic has been weak, he told analysts, while commercial, wholesale and proprietary brand sales have helped replace business lost when locations close.

The company completed two store closures after the third quarter ended and expects to close another two or three before year-end. Lampert said the company expects to finish 2026 with about 14 stores, down from 65 in 2022. Some remaining stores serve as distribution points, and profitable locations with walk-in customers will remain open for now, he said.

The restructuring also includes targeted workforce reductions and other operating changes. Sanders said the company is considering additional rationalizations, including potential inventory charges in the fourth quarter. Management did not quantify expected savings on the call.

Sanders said no individual customer currently accounts for more than 5% of sales. When stores close, the company aims to retain commercial customers through nearby locations or its commercial sales team, he said.

Cash and Technology Investments

GrowGeneration ended the quarter with $41.8 million in cash, cash equivalents and marketable securities and no debt. It repurchased 700,000 shares during the quarter for approximately $1 million, with about $8 million remaining available under its repurchase authorization at quarter-end.

Lampert said the company acquired technology from Order Junky in October to help sales representatives combine customer pricing, inventory availability and freight costs into a single quote that can be converted into an order. GrowGeneration is also evaluating the platform’s artificial intelligence capabilities for administrative work, he said.

About GrowGeneration (NASDAQ:GRWG)

GrowGeneration Corp. NASDAQ: GRWG is a specialty retailer serving the hydroponic and organic gardening markets. The company sells cultivation supplies and equipment to commercial and home growers through its retail stores and e-commerce platform. Its product offerings include hydroponic systems, growing media, plant nutrients, lighting, irrigation equipment, environmental-control systems, propagation supplies, and other gardening products. GrowGeneration also provides cultivation-related supplies and resources for customers growing a variety of indoor and greenhouse crops.

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