Company: GROVW
Filing Date: 2025-03-19
Form Type: 10-K
Source: 0001628280-25-013839
Chunk: 105

Company: Grove Collaborative Holdings, Inc.
Filing Date: 2025-03-19
Form: 10-K
Item: Item 7
Chunk 105
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 customers is not considered revenue and is included in accrued liabilities until remitted to the taxing authorities. 

While our historical financial results have included selling in brick-and-mortar retail channels, we have made the decision to exit those channels. We do not expect this decision to have a significant impact on our financial results. We expect revenue to remain approximately flat to down in the mid single digit percentage range in 2025 compared to 2024. We expect first quarter of 2025 revenue to be lower than revenue in the fourth quarter of 2024 due to seasonality and adverse impact from our Shopify transition. We expect revenue to improve in the second and third quarters of 2025 compared to the first quarter of 2025, leading to year over year growth in the fourth quarter of 2025.

Cost of Goods Sold

Cost of goods sold consists of the product costs of merchandise, inbound freight costs, vendor allowances, costs associated with inventory shrinkage and damages and inventory write-offs and related reserves.

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Gross Profit and Gross Margin

Gross profit represents revenue less the cost of goods sold. Gross margin is gross profit expressed as a percentage of revenue. We generally record higher gross margins associated with sales of Grove Brands products compared to sales of third-party products. To help motivate first-time customers to purchase on our DTC platform, we generally offer higher discounts and free product offerings, and as a result, our overall margins can be adversely affected in periods of rapid new customer acquisition. Our gross margin also fluctuates from period-to-period based on promotional activity, product and channel mix, the timing of promotions and launches, and inbound transportation rates, among other factors. Our gross profit and gross margin may not be comparable with that of other retailers because we include certain fulfillment related costs in selling, general, and administrative expenses while other retailers may include these expenses in cost of goods sold.

Operating Expenses

Our operating expenses consist of advertising, product development, and selling, general and administrative expenses.

Advertising

Advertising costs are expensed as incurred and consist primarily of our customer acquisition costs associated with online advertising, as well as advertising on television, direct mail campaigns and other media. Costs associated with the production of advertising are expensed when the first advertisement is shown. We expect to maintain advertising costs at current levels as a percent of revenue through 2025 focused on deploying spend efficiently across channels while managing cash flow.

Product Development

Product development expenses are related to the ongoing support and maintenance of our proprietary technology, including our DTC platform, as well as amort