Hydrofarm Holdings ( NASDAQ: HYFM ) stock sank ~16% postmarket on Tuesday after the firm slashed its 2022 guidance , citing recession in the hydroponics industry.
HYFM expects 2022 net sales of ~$330M-$347M, well below consensus estimate of $481.69M. Its prior outlook was $480M-$520M.
The new guidance assumes similar sales levels to those seen from late Q2 through Jul. continuing over the remaining months, combined with further reduction to account for holiday shortened months in Q4.
2022 adj. EBITDA loss is expected to be $25M-$16M vs. $46M-$54M, hurt by $13.4M of inventory reserves in the YTD period. The outlook assumes no material increase in inventory or accounts receivable reserves.
CEO Bill Toler said the hydroponics industry recession in the U.S. and Canada continued to impact results.
"While we experienced encouraging results in Mar. and Apr., sales trends weakened in H2 of Q2, disrupting our expected sales mix and resulting in net sales, net loss and adj. EBITDA below expectations for Q2," he added.
HYFM expects Q2 net sales of $96M-$97.5M, widely missing consensus estimate of $126.49M, down ~28% Y/Y at the midpoint of the range.
Q2 adj. EBITDA loss is projected to be $8.4M-$6.9M, impacted by $10.2M inventory reserve, compared with adj. EBITDA of $16.2M in Q2 2021.
Decrease in adj. EBITDA is due to lower sales and gross profit margin, hit by an inventory reserve consisting primarily of a write-down of certain lighting products of ~$10.2M, as well as higher labor and freight costs.
Q2 net loss is expected to be $210.4M-$200.4M vs. net income of $2.3M in Q2 2021.
HYFM's Q2 prelim. results include goodwill impairment charge of ~$189.6M.
HYFM reduced costs by ~$14M on an annualized basis. It also decreased net debt by ~$14.1M during Q2 by improving its working capital position and controlling costs.
For further details see:
Hydrofarm Holdings stock sinks on slashed guidance amid hydroponics recession