Insomniacs will probably readily recognize the aeroponic garden sets called AeroGardens – the infomercials featuring the container gardens are ubiquitous late at night, and have been featured on QVC five times so far.
For those who haven’t caught the late-night infomercial or the QVC appearances, AeroGardens are kitchen container gardens that allow even the brownest of thumbs to grow salad fixings – lettuce, tomatoes, herbs and even strawberries – within a controlled environment.
The company that produces AeroGardens – AeroGrow (AGWI: OTCBB), went public in January, and watched its stock skyrocket to $10 per share before settling back down to between $6 and $7 per share.
AeroGrow has a 52-week range of $5.52 to $10, and currently trades at just under $7. It has a market cap of 66.77 million, and an average daily volume of 18,580, but is trading today at more than double that at 44,370.
The company says that 100,000 AeroGardens were sold in its first year of business, which began last March.
“It’s been quite a launch. We expected a high level of consumer acceptance, but going from zero to 100,000 gardens sold in less than a year has been a powerful market confirmation of the AeroGarden’s appeal,” AeroGrow CEO Michael Bissonnette said in a press release.
Besides taking to the television, AeroGardens can be found in various retail outlets, as well as in catalogs like Brookstone, Frontgate and SkyMall.
And the love of AeroGarden hasn’t contained itself to just the kitchen, either. Bissonnette said that people are now even reaching out in cyberspace to talk about their AeroGarden experiences.
“Our consumers are forming their own chat groups, sharing photos of their gardens and getting involved with the product in ways we couldn’t even imagine when we started,” he said.
The increasing interest – and orders – in the product also spurred the company to add an additional manufacturer and to expand production capacity. That led to some problems come last Christmas when the company reported $500,000 in back orders that could not be delivered before the New Year. In February, the company’s newest manufacturer, Main Power Factories, added equipment to expand production to 100,000 AeroGardens per month. In addition, AeroGrow’s first manufacturer, MKD Industries, increased production from 15,000 to 23,000.
The company also produces seed kits for AeroGardens, and those “Plug and Grow” kits also saw increased demand – the company responded by increasing production by 100 percent to 5,000 kits per day.
Third-quarter results ending Dec. 31, 2006, show revenue of $4.86 million. Revenue for the first nine months of operation since the introduction of AeroGarden in March 2006 was $6.71 million. The company says that the aforementioned backorders put a crimp fourth-quarter revenues, as well as the company’s policy to not recording revenue – other than shipping and handling fees – from sales generated from the company’s direct-to-consumer marketing until the end of the 30-day trial period advertised. That policy resulted in $350,000 in revenue that did not get recorded until after the quarter ended.
The company had a net loss of $2.90 million for the quarter and $8.43 million for the nine-month period. Among the losses were more than $2.29 million in penalties payable to investors of AeroGrow’s 2005 convertible debt offering and 2006 private placement offering, which are payable in shares of common stock. The company says that delays in obtaining SEC approval for the registration of the company’s common stock created those penalties.
Increases in air freight costs also impacted earnings, the company said, especially freight costs incurred when attempting to speed up deliveries from China for key customers during the holiday season.
