Release Date: May 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grove Collaborative Holdings Inc (GROV, Financial) has successfully migrated its e-commerce platform to a more scalable and flexible system, which is expected to enhance future growth capabilities.
- The company has seen improvements in new customer acquisition metrics, with better advertising efficiency and stronger first order economics.
- Grove Collaborative Holdings Inc (GROV) has expanded its third-party product assortment significantly, increasing the number of brands by 41% and individual products by 54% year over year.
- The company has taken steps to mitigate the impact of tariffs through targeted pricing adjustments, supplier renegotiations, and strategic sourcing shifts.
- Grove Collaborative Holdings Inc (GROV) has extended the maturity of its asset-based loan facility to April 2028, improving its balance sheet strength.
Negative Points
- Revenue for the first quarter of 2025 was $43.5 million, down 18.7% year over year, primarily due to lower repeat order volume and disruptions from the e-commerce platform transition.
- The company experienced a decline in active customers, down 16% compared to the prior year, largely due to reduced advertising spend in previous years.
- The e-commerce platform transition resulted in a $2 to $3 million revenue impact in Q1, affecting customer retention and order volume.
- Gross margin declined by 260 basis points to 53%, impacted by the absence of certain customer fees and a smaller benefit from the sell-through of previously reserved inventory.
- Grove Collaborative Holdings Inc (GROV) revised its full-year 2025 revenue guidance to decline approximately mid-single digit to low double-digit percentage points year over year.
Q & A Highlights
Q: Have you been able to layer on additional marketing, and how should we think about marketing as a percentage of sales for the rest of the year?
A: (CEO) We are seeing strong performance in new customer acquisition, especially after the platform transition. Currently, our advertising spend is at 6.4% of sales, and we plan to increase this as we are witnessing better returns on new customer acquisitions.
Q: Is the platform transition complete, and how long will it impact the rest of the year?
A: (CEO) We have moved past the most challenging parts of the transition. The impacts have been factored into our revenue guidance, and we are seeing week-over-week progress.
Q: How should we think about the trajectory of sales for third-party and own brands throughout the year?
A: (CEO) Expect a steady improvement each quarter leading to positive growth in Q4. The customer experience now supports both third-party and own brands, with margins stabilizing as third-party sales increase.
Q: What is the impact of the e-commerce platform transition on revenue and customer retention?
A: (CEO) The transition resulted in a $2 to $3 million revenue impact in Q1. We are implementing strategies to re-engage affected customers and have factored these impacts into our revised full-year guidance.
Q: How are you addressing the challenges posed by tariffs?
A: (CEO) We are implementing targeted pricing adjustments, renegotiating with suppliers, and exploring diversified sourcing strategies to mitigate the impact of tariffs on our margins and customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
