Scotts Miracle Beats Revenue Estimates Even As Sales Drop

The Scotts Miracle-Gro Company (NYSE: SMG) reported full-year financial results as sales dropped 17%  in the fourth quarter to $737.8 million. Still, this topped the Yahoo Finance average analyst estimate for sales of $689 million. Scott’s reported a GAAP loss in the quarter of $0.87 per share compared with earnings last year of $0.07 per diluted share. The adjusted loss in the quarter was $0.82 per share compared with earnings of $0.06 per diluted share a year ago. The estimate was for a loss of $0.84.

Scott’s said its hydroponic business Hawthorne saw sales decline 2% to $329.1 million due to declines in the European and Canadian businesses. The company also noted that due to a shift in the fiscal calendar, the fourth quarter had six fewer days than a year ago which negatively impacted the quarter by $54 million. Excluding the calendar impact, U.S. Consumer sales still declined 23% and Hawthorne sales increased 5%, including a more than 10% increase in sales of hydroponic products in the U.S.

GAAP income from continuing operations was $517.3 million, or $9.03 per diluted share, compared with $386.9 million, or $6.78 per diluted share in the prior year. Non-GAAP adjusted earnings, which excluded impairment, restructuring, as well as other non-recurring items, were $527.7 million, or $9.23 per diluted share, compared with $411.7 million, or $7.24 per diluted share a year ago.

Full Year Earnings

For the full year ending in September, sales increased 19 % to $4.93 billion versus $4.13 billion a year earlier. GAAP earnings from continuing operations were $9.03 per diluted share, compared with $6.78 per diluted share in the prior year. Non-GAAP adjusted earnings, which are the basis of the company’s guidance and exclude impairment, restructuring, and other non-recurring items were $9.23 per diluted share compared with $7.24 per diluted share a year ago.

“The continued engagement by consumers throughout the lawn and garden season drove full-year U.S. Consumer sales 11 percent higher on a full-year basis on top of last year’s 25 percent growth,” said Jim Hagedorn, chairman, and chief executive officer. “Consumer purchases of our products at our largest retail partners – as measured in units – were up 6 percent for the full year, with growth in every major product category. When compared to 2019, consumer purchases are up 21 percent and suggest a level of consumer enthusiasm that we expect to carry into the 2022 lawn and garden season.

“At Hawthorne, we continued to use our competitive advantages to drive 39 percent segment growth on a full-year basis despite a 2 percent decline in the fourth quarter. While we saw expected pressure on Hawthorne’s Q4 results due to a widely publicized over-supply of cannabis in California, sales of hydroponic supply products in the U.S. increased more than 10 percent on an apples-to-apples basis and we remain focused on the long-term opportunities to expand our leadership in this rapidly evolving industry.

Outlook

Scott’s also gave guidance for fiscal 2022 that includes non-GAAP adjusted earnings of $8.50 to $8.90 per share on company-wide sales growth of 0 to 3%. The company said that this increase will be helped by a second pricing action in the U.S. Consumer segment to mitigate commodity inflation.

“As we look to fiscal 2022, we have continued confidence in our strategy and ability to drive long-term shareholder value,” Hagedorn continued. “Certain macro issues beyond our control may present challenges we haven’t faced for a while, but I’m confident in our team’s ability to execute. We expect to continue pursuing acquisition opportunities throughout the year and remain committed to using our financial flexibility to return cash to shareholders. That is why, in addition to the $113 million of share repurchases in fiscal ’21, we plan to repurchase as much as another $300 million in 2022.”

Hawthorne sales are expected to grow approximately 8 to 12% with most of the growth expected in the second half of the year. “At Hawthorne, we expect the current over-supply of cannabis to put negative pressure on our growth rate through the rest of the calendar year and into the second quarter, at which point we anticipate a more normal growth rate,” said Cory Miller, chief financial officer.

The stock was moving higher by 3% on the earnings announcement and was lately selling at $152, a big drop from the year’s high of $254.

 

Debra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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