AeroGrow Q3 financials hit after a disappointing holiday season

BOULDER — AeroGrow International Inc. (OTC: AERO) had a third-quarter loss of 2 cents per share and a net loss of $707,000.

Compared to the same period the year prior, the Boulder-based garden system manufacturer had a net income of $391,000, or earnings of 1 cent per share. The company’s third quarter ended Dec. 31, 2018.

AeroGrow had net revenue of $12.9 million, which is a decrease year-over-year when the company had net revenue of $17.4 million. Gross profit also shrank year-over-year, from $5.9 million in the third quarter ended in 2017 to $4 million in the third quarter ended in 2018.  

“Our third quarter sales results proved to be disappointing for us, although they are complicated by timing issues associated with sell-in and drop ship support for our retail customers,” said AeroGrow President and CEO J. Michael Wolfe in a prepared statement.  

Wolfe said the company implemented a lot of change in the December quarter: new products, new branding and packaging and a new marketing and media strategy.

“I think some of these changes worked well, and some didn’t perform to the level that we had anticipated,” he said in his statement. “These factors, in combination with what proved (at least for us) to be a difficult consumer environment in the weeks leading up to Christmas, created some significant headwinds for us.  However, a careful look at our fundamental metrics (including gross margin improvement for the nine-month period and overall seed kit sales) continues to suggest a strong underlying business on an upward trajectory.”
Wolfe went on to say that January sales have rebounded since the disappointing December.

Some of the changes the company has had included updating its flagship product, the AeroGrow Harvest, which has received positive customer feedback.

“The most significant change we made this year was to our marketing strategy,” Wolfe said. “We decided that we would begin to make a series of changes designed to evolve our brand from being a ‘direct response-focused brand’ to more of a ‘lifestyle brand.’  We believe that long-term this is a key evolution for us to make if we are to truly build a widely accepted category and a brand that is broadly recognized.”

Wolfe said the company has undertaken a full review of it changes and plans to correct and grow from any mistakes it made.

“We’ve had a remarkable five year period here at AeroGrow, with compound annual growth of over 35 percent leading into this year – and strong performance during the first half of Fiscal 2019,” he said. “Obviously, we stubbed our toe this past holiday season, but it appears to me that we had a ‘four-week holiday season problem’ and not an ‘AeroGarden problem.’”

on Facebook on LinkedIn