AeroGrow Reports 85% Increase in Q4 2012 Shipments

AeroGrow, makers of the AeroGarden line of indoor gardening products, announced results for the three months ended December 31, 2012, the third quarter of its fiscal year ending March 31, 2013.

"We successfully executed a number of our initiatives for the holiday season," said Mike Wolfe, President and CEO of AeroGrow. "We re-entered the retail market with highly successful product launches at Amazon.com and other retailers, launched our innovative new AeroGarden ULTRA product, broadened our marketing efforts to reach new AeroGarden purchasers, and, most importantly, drove an 85% increase in the number of AeroGarden units shipped during the quarter. This growth in AeroGarden shipments - the razors in our razor/razor blade business model - is expected to result in a resurgence of our recurring revenue from seed kits, grow bulbs, and other accessories in the coming quarters and years."

The new AeroGarden ULTRA, launched on November 1st exclusively into the direct-to-consumer channels, was the Company's highest selling product during the holiday season. The ULTRA offers over 100 improvements that make indoor growing easier and faster for beginners, and is fully customizable, allowing the advanced indoor gardener to grow a wide variety of plants at home.

"We were very pleased by the consumer demand for AeroGardens this holiday season," continued Mr. Wolfe. "Our AeroGarden products were consistently ranked among the top 10 sellers in the Patio, Lawn & Garden category at Amazon, even though they were only launched in mid-November. We believe this demonstrates the kind of consumer demand we can expect for our products when we expand the reach of our marketing message to customers who are new to indoor gardening and to the AeroGarden franchise."

Despite the strong AeroGarden shipments, AeroGrow's total sales declined 1.8% during the quarter in large part because of the effects of a labor strike in early December at West Coast ports that adversely impacted the Company's inventory availability and therefore its ability to meet pre-Christmas demand. The Company's net loss of $296,788 was greater than the $139,221 net loss reported in the previous year because of a significant year-over-year increase in business building activities like product development spending related to the AeroGarden ULTRA, and increased investment in brand and market-building spending.

RESULTS OF OPERATIONS

For the three months ended December 31, 2012, total revenue of $2,972,493 was down 1.8%, or $53,452, relative to the same period in the prior year. Direct-to-consumer sales fell 17.0%, to $2,322,967, in part reflecting the impact of a labor strike that shut down most of the activity at the Los Angeles and Long Beach port complexes for the eight-day period ended December 6, 2012. The strike and its aftermath delayed the delivery of container loads of AeroGardens en route from manufacturers in Asia during the critical pre-Christmas selling period, causing us to be out-of-stock of key AeroGarden inventory items in both our direct response and retailer channels and adversely impacting sales. In addition, we experienced lower sales of recurring revenue items such as seed kits and accessory items. The decline in direct-to-consumer sales was for the most part offset by a 203.9% increase in sales to retailers, to $626,072, as we successfully launched the AeroGarden product line in a number of new retailer customer accounts, including Amazon.com.

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