Company: GROVW
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001841761-25-000048
Chunk: 288

Company: Grove Collaborative Holdings, Inc.
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 8
Chunk 288
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 To help motivate first-time customers to purchase on our DTC platform, we generally offer higher discounts, 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.

Product Development

Product development expenses are related to the ongoing support and maintenance of our DTC platform and the product and packaging innovation in our Grove Brands products. Product development expenses consist primarily of personnel-related expenses, including salaries, bonuses, benefits and stock-based compensation expense. Product development costs also include allocated facilities, equipment, depreciation and overhead costs.

Selling, General and Administrative

Selling, general and administrative expenses consist primarily of compensation and benefit costs for personnel involved in general corporate functions, including stock-based compensation expense, and certain fulfillment costs, as further outlined below. Selling, general and administrative expenses also include the allocated facilities, equipment, depreciation and overhead costs, marketing costs including qualified cost of credits issued through our referral program, costs associated with our customer service operation, and costs of environmental offsets. Selling, general and administrative expenses have declined for the three and nine months ended September 30, 2025 compared to the three and nine months ended September 30, 2024, respectively, as a result of decreases in fulfillment costs largely driven by lower sales and our cost management initiatives. In November 2025, we executed a reduction in force as part of an initiative to streamline selling, general, and administrative expenses, which is expected to lower our ongoing cost structure and deliver savings beginning in the fourth quarter. While these actions are anticipated to generate longer-term efficiencies, the immediate cash savings are expected to be offset by severance and other costs incurred related to the reduction in force.

Fulfillment costs represent those costs incurred in operating and staffing our fulfillment centers, including costs attributable to receiving,