Although Grove Collaborative’s third-quarter net revenue dropped 20.6% year over year to $61.8 million, CEO Jeff Yurcisin is upbeat regarding the brand’s future and its strategic shift towards profitability.
“I’m also proud to share a significant milestone for Grove — our first adjusted EBITDA profitable quarter — which serves as an inflection point as we look to the future,” the executive said in a statement Thursday. “We will remain focused on profitability in the near-term while also pursuing a path for profitable growth in the second half of 2024 by becoming more meaningful in the daily lives of our customers and further embracing sustainability as our point of differentiation.”
However, the company’s CFO Sergio Cervantes noted on a call with analysts Thursday that Grove does not expect to remain adjusted EBITDA positive every quarter moving forward and anticipated an adjusted EBITDA loss in Q4.
Yurcisin told Retail Dive that much of the work to get the brand’s latest earnings results was done prior to his arrival, given that his appointment was announced in August.
“As you're pulling back on marketing spend, expecting higher efficiencies and better paybacks and transforming the core customer experience, that's going to take a few quarters to fully nail and to transform it and we're in the middle of it,” Yurcisin said. “From my lens, we have to focus on profitability first.”
The company — which sells branded and third-party lifestyle products focused on sustainability — recorded a Q3 net loss of $9.8 million compared to an income of about $7.7 million the year before. Meanwhile, Grove’s operating loss improved by nearly 82% to $4.1 million.
Its operating expenses decreased 38.5% to $37.3 million and ended the period with a $5 million increase in cash, cash equivalents, and restricted cash to $94.7 million, mainly due to an investment from Volition Capital announced in August.
Grove lowered its full-year guidance, now expecting net revenue between $257.5 to $262.5 million instead of the previously projected $260 to $270 million.
The company has embarked on a concerted effort to lower advertising spend, which has impacted active customer growth.
Direct-to-consumer active customers decreased 30.2% to one million and Grove branded products made up 44.8% of net revenue during Q3 — as opposed to 47% the year before — as the company continues to increase its third-party product offerings. The company released its limited-edition holiday collection of products during the third quarter.
“There's a balance here,” Yurcisin said to Retail Dive. “We are not going to cut marketing down so low that we are not acquiring any new customers. What we're doing is being really rational and expecting the right payback. ... These are the right long-term decisions on marketing spend. The challenge is you're comping these quarters that candidly had unsustainable marketing spend that was not inherently profitable. As we do that, yes, new customers will keep coming down like we've spoken about publicly, but the reality is you still have this great customer base.”
While Yurcisin told analysts that the consumers are still feeling macroeconomic pressures, the executive thinks Grove’s “tailwinds are greater than any headwinds” thanks to the company’s cost structure decisions.