Knobias Clip Report (02-15-2008)
Submitted By Knobias ClipReport
AERO: Revenues Soar; Company Attempts to Grow Profit
The fourth quarter and holiday season was noted as being a rough one for many retailers. Stores and producers across the board saw some significant weakness with the limited purchasing power of the consumer due to high costs of energy and food. While the season was difficult, a few companies have begun reporting growth in top line numbers despite the overall sluggish retail quarter.
One of those companies was AeroGrow International, Inc. (AERO). The Company is the producer of the AeroGarden® line of indoor gardening products. AeroGardens feature NASA-proven, dirt-free aeroponic technology, allowing anyone to grow farmer’s market fresh herbs, salad greens, tomatoes, chili peppers, flowers and more, indoors and year-round.
The Company reported their fourth quarter numbers on Thursday. Revenues came in at approximately $14.6 million, an increase of 201% over the $4.9 million reported for the prior year’s quarter ended December 31, 2006, and an increase of 132% over the previous quarter’s $6.3 million in revenues. For the nine months, revenue increased by 305% from $6.7 million to $27.2 million.
Noted CEO Michael Bissonnette, “This quarter saw our revenues more than double in just one quarter, an extraordinary rate of growth. “
But the Company’s bottom line was fairly disappointing compared to the top. For the quarter, the Company reported a net loss of $1.65 million, or $0.13 per share which compares to a net loss of $2.9 million for the quarter ended December 31, 2006. Analysts had estimated an estimate of break even.
The Company noted a variety of factors causing the drop in net income. AeroGrow significantly increased their advertising and promotional activities to increase sales during the sluggish fourth quarter. They allowed fixed costs and overhead to rise too rapidly to support the increased revenue. They also suffered from deferred revenue related to their 36 Day Free Trial Offer promotion.
Following the earnings release, shares fell from $6 to the $4.40 area in the past two days. But going forward, the Company has outlined a few critical areas which will improve their gross margins and operating profit. They divided the Company into four business units led by a GM who will accountable for performance. Other initiatives include cost reductions in production, distribution, and logistics. Fixed and overhead will also see decreases. The culmination was expected to produce a 3 to 4 point improvement in margins on an annual basis.
With the Company’s large top line growth and initiatives in place to cut costs and hold accountable all involved in the production process, the name could be one to watch to see if that top line growth eventually makes its way down to the bottom line. With that in mind, investors would be wise to watch.
Knobias, Inc. has received monetary compensation from the above company for services rendered as part of the Knobias Media Package. Please refer to the “Media Package Disclaimer.”
Visit 1800blogger to see all of our industry leading blogs.
