Hydrofarm Reports 16% Decline in Net Sales for Fiscal Year 2024

Hydrofarm Holdings Group, Inc. reported a significant decline in its financial performance for the fiscal year ending December 31, 2024, with net sales of $190.3 million, down 16% from $226.6 million in 2023. This decrease was attributed to a 12% reduction in the volume and mix of products sold, alongside a 4% decrease in pricing, largely driven by an oversupply in the cannabis market. The company's gross profit also fell to $32.1 million, a decrease of 14.6% year-over-year, although the gross profit margin improved slightly to 16.9% from 16.6% in the previous year.

In response to ongoing adverse market conditions, Hydrofarm initiated a restructuring plan that included significant operational changes. The first phase involved narrowing its product portfolio and consolidating manufacturing and distribution centers, resulting in restructuring charges of $10.7 million in 2023 and $2.2 million in 2024. The second phase of the restructuring, which began in the third quarter of 2023, focused on further consolidating U.S. manufacturing facilities and resulted in additional charges primarily related to inventory write-downs. The company also executed an asset sale in May 2024, selling certain durable equipment products for approximately $8.7 million, which is expected to improve profitability on future sales.

Operationally, Hydrofarm serves over 2,000 wholesale customer accounts across the U.S. and Canada, with a focus on controlled environment agriculture (CEA) products. The company has streamlined its operations into two U.S. manufacturing locations and a peat moss harvesting operation in Canada. As of December 31, 2024, Hydrofarm employed 286 individuals, a reduction from 369 the previous year, as part of its efforts to enhance operational efficiency.

Looking ahead, Hydrofarm's management expressed cautious optimism regarding future performance, contingent on market recovery and the successful implementation of its restructuring initiatives. The company anticipates annual cost savings of over $2 million from these efforts. However, ongoing challenges in the cannabis market, including regulatory changes and fluctuating demand, may continue to impact the company's financial results. Hydrofarm remains focused on maximizing asset recovery and evaluating opportunities for further operational consolidation to navigate the current market landscape effectively.