Hydrofarm Warns Of Slowing Sales In Fourth Quarter

Despite the sales warning, Hydroponic company Hydrofarm Holdings Group, Inc. (Nasdaq: HYFM) reaffirmed its net sales and adjusted its EBITDA outlook for the full fiscal year 2021. Hydrofarm has forecast net sales of approximately $470.0 million to $490.0 million, representing growth of 37% to 43% versus fiscal 2020. However, Hydrofarm also noted that its fourth-quarter 2021 net sales will be attributed to M&A and partially offset by a decline in organic sales. The company estimated that the organic sales decline experienced in the fourth quarter was in the low-to-mid teens, driven by a sales mix that is primarily consumable products as opposed to durable products.

Hydrofarm also said it would provide a detailed financial outlook for 2022 as part of its fourth-quarter earnings report. “However, at this time, management continues to expect 8% to 10% organic top line growth for the full calendar year of 2022, which will likely be weighted toward the back half of 2022 as the industry laps strong comps in the first half of this year and several states that have recently enacted pro-cannabis legislation build momentum through 2022. In addition, management expects to benefit from the full year of ownership in 2022 of the five businesses acquired during 2021.”

The company has estimated that adjusted EBITDA will range between $47.0 million to $53.0 million. This implies full-year organic growth of approximately 18% to 23% and M&A growth of approximately 19% to 20%. The company said it would release its earnings in March 2022.

Hydrofarm said in a statement that its 2021 outlook includes the following assumptions:

  • Partial period contributions from the following acquisitions:
    • Heavy 16 – net sales and EBITDA contribution for May through December 2021
    • House & Garden – net sales and EBITDA contribution for June through December 2021
    • Aurora Innovations – net sales and EBITDA contribution for July through December 2021
    • Greenstar – net sales and EBITDA contributions for August through December 2021
    • IGE – net sales and EBITDA contributions for November through December 2021

The warning comes on the heels of Scotts Miracle-Gro (NYSE: SMG) also stating that its hydroponic business Hawthorne was seeing a decline in sales.  Scotts said the decline in sales was caused by a slowdown in the cannabis market as well as supply chain disruptions that have delayed the sale of certain product lines. However, the company said it was maintaining its full-year company-wide outlook for adjusted earnings per share.

 

 

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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