Scotts Miracle-Gro Increases Guidance As Hawthorne Sales Hit $300 Million

The Scotts Miracle-Gro Company (NYSE: SMG) reported fiscal third-quarter sales increased 28% to $1.49 billion, beating analyst estimate for $1.3 billion (Yahoo Finance). The stock was popping over 12% on the revenue and earnings beat.

Hawthorne sales increased 72% to $302 million versus $176 million for the same time period a year ago. The U.S. consumer increased by 21% to $1.08 billion from $889.1 million.

Increased Guidance

The continued strength of the business in fiscal 2020 caused Scotts to increase its guidance for full-year sales, adjusted earnings, and free cash flow. The new sales forecast for fiscal 2020 is for 26-28% growth and is estimating the U.S. consumer segment grows 20-22%. Hawthorne sales are forecast to grow 55-60%. Scotts had said back in June, that it expected U.S. Consumer sales to increase 9-11% in fiscal 2020 and Hawthorne to increase 45 to 50%.

The revised guidance for non-GAAP adjusted earnings per share of $6.65 to $6.85 compares with the June forecast of $5.65 to $5.85 per share. The company said it expected non-GAAP free cash flow of approximately $400 million, up from approximately $350 million earlier.

Third Quarter Results

The company also delivered net income of $203 million. The third-quarter GAAP EPS increased 13% to $3.57; Non-GAAP adjusted EPS up 22% to $3.80. The average analyst estimate was for $3.37 according to Yahoo Finance.

“In our U.S. Consumer segment, we saw significant acceleration of consumer engagement beginning in May that continues as we speak,” said Jim Hagedorn, Chairman, and Chief Executive Officer. “Consumer purchases entering August are up 23 percent at our largest four retail partners and we’ve seen increases in every product category. We especially have benefitted from a more than 40 percent increase in branded soils and even higher gains in consumer purchases for most of our Ortho insect control business.”

“We also continued to see strong third-quarter growth at Hawthorne in every product category and geography. The team at Hawthorne has done an outstanding job this year achieving significantly higher-than-expected growth while also exceeding our operating margin targets.”

“Our results this year continue to exceed our most optimistic expectations and are a testament to the critical nature of the categories in which we compete, the commitment of our retail partners, and the loyalty of the consumers and cultivators who rely on our products for their success,” said Hagedorn. “As we enter the final weeks of fiscal 2020 and prepare for the start of our next fiscal year, we remain optimistic about the strength of our business as well as our ability to continue to enhance shareholder value.

Giving Back

ScottsMiracle-Gro said its Board of Directors approved payment of a special dividend of $5 per share and increased its regular quarterly dividend by 7 percent to $0.62 per share. Both dividends are payable September 10 to shareholders of record on August 27.

The company also decided to make special one-time payments later this year to nearly 3,000 hourly and salaried associates who did not participate in the bonus plans. “We also will enhance bonus payments to another nearly 1,500 eligible associates who do participate in incentive plans. In addition, we plan to double our charitable contributions to benefit the communities we serve.”

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor 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 Master's degree in Business Journalism from New York University.

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