Scotts Miracle-Gro Reports Record Sales, Raises Guidance

The Scotts Miracle-Gro Company (NYSE: SMG) reported that company-wide sales increased 105% to a record $748.6 million in its fiscal first-quarter primarily driven by strong retailer support in the U.S. Consumer segment as well as continued momentum in Hawthorne, the company’s hydroponic subsidiary.

For the quarter ending January 2, 2021, Scotts reported that income from continuing operations was $0.43 per diluted share, compared with a loss of $1.28 per share in fiscal 2020. Non-GAAP adjusted earnings – which is the basis of the Company’s guidance – was $0.39 per diluted share in the quarter compared with a loss of $1.12 per share last year. Due to the seasonal nature of the lawn and garden category, ScottsMiracle-Gro has historically reported a loss during its first quarter. The results in 2021 mark the first time Scotts has ever reported a first-quarter profit.

“While we anticipated a strong start to fiscal 2021, both the U.S. Consumer and Hawthorne segments surpassed our expectations and put us on a good trajectory for the balance of the year,” said Jim Hagedorn, chairman, and chief executive officer. “And Hawthorne continues to demonstrate its best-in-class performance within its industry, working with retailers and growers to help drive their success. Our strong start gives us renewed confidence in our full-year outlook although we remain sensitive to the challenges in the second half of the fiscal year against historic comparisons. We now believe we have enough visibility, however, to raise our full-year sales growth outlook for Hawthorne to a range of 20 to 30%, compared with our previous outlook of 15 to 20%. Despite the historically strong start in U.S. Consumer, it remains too early in the season to adjust our outlook for that business.”

Revenue

Sales rose 105% to $748.6 million from $365.8 million, helped in part by the company’s fiscal calendar, where the first quarter of 2021 had five more days than the first quarter of fiscal 2020. The difference had a sales impact of approximately $43 million. The real shining star though is the indoor growing company Hawthorne whose sales increased 71% to $309.4 million driven by strong demand in all categories of indoor growing equipment and supplies. U.S. Consumer segment sales increased 147 percent to $408.2 million. Consumer purchases of the Company’s products at its largest retail partners increased 40 percent in the quarter. A significant portion of the sales increase for U.S. Consumer is attributable to the replenishing of retail inventory.

Selling, general and administrative expenses (SG&A) increased 31% to $156.7 million. The company attributed the increase to higher marketing expenses in the U.S. Consumer segment. “Our investment in marketing continues to be a focus area as we strengthen our relationship with gardeners,” Hagedorn said. “Our year-round commitment to driving the conversation with consumers will include our first commercial specially produced for the Super Bowl, which is scheduled to appear in the second quarter of this Sunday’s game.

Outlook

Scotts said it now expects fiscal 2021 sales growth of 1 to 6% compared to 0 to 5% previously. Hawthorne sales guidance was increased to a range of 20 to 30% from a previous range of 15 to 20%. Guidance for U.S. Consumer sales of 0 to minus 5% was reaffirmed. Guidance for non-GAAP adjusted EPS of $8.00 to $8.40 was reaffirmed as the company noted that it now expects SG&A to decline 3 to 8% from 2020 spending levels, compared to a previous estimate of a 6 to 11% year-over-year decline. The adjusted gross margin rate is now expected to decline 125 to 175 basis points year-over-year due to higher commodity costs and segment mix more heavily skewed to the lower margin Hawthorne business than previously contemplated. The revised gross margin rate guidance compares to a previously expected decline of 50 basis points.

 

Debra Borchardt

Debra BorchardtDebra 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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