Lawn leader Scotts Miracle-Gro Co. (NYSE: SMG) disclosed a dip in annual sales but outperformed earnings expectations, thanks to cost-saving measures. Despite the overall decline, executives expressed confidence in the company’s strategic turnaround.
For the fiscal year ending Sept. 30, 2023, Scotts reported a 10% sales decrease, attributed largely to sluggish performance in its U.S. Consumer segment and a significant downturn in its Hawthorne hydroponics subsidiary.
The company’s challenges were worsened by a reported GAAP loss of $6.79 per share. However, adjusted non-GAAP earnings stood at $1.21 per diluted share when excluding certain non-recurring costs. The latter figure suggests a silver lining as it exceeded company guidance.
Amidst the downturn, Chairman and CEO Jim Hagedorn highlighted the company’s “stabilization” efforts and a roadmap to recovery, anchored by Project Springboard — a cost-saving initiative that’s showing faster-than-expected benefits, the company said.
In the fourth quarter, Scotts saw sales plunge by 24% to $374.5 million, with its U.S. Consumer sales falling by a third. The company pointed to lower volumes and delayed shipments as primary factors. The gardening segment, Hawthorne, also declined by 11%.
Still, this beat analyst’s expectations by $42.2 million.
The company’s gross margin rates painted a troubling picture, turning negative versus the prior year’s period due to fixed cost challenges and unfavorable pricing, although partly offset by distribution efficiencies from Project Springboard.
Impairment charges, including a significant write-down of its stake in the Bonnie Plants joint venture, were notable contributors to a fourth-quarter GAAP net loss of $468.4 million, or $8.33 per share.
Despite these losses, Scotts highlighted a substantial $680.7 million increase in free cash flow and a year-end debt-to-EBITDA ratio within permissible limits.
Looking ahead to fiscal 2024, the company is banking on margin recovery and operational improvements. Scotts said it plans to bolster shareholder value through disciplined cost management, robust free cash flow, and a focus on returning the core consumer business to growth.
Executive Vice President and CFO Matt Garth pointed to management over the past year and the intent to drive performance and financial flexibility.
“Through the team’s efforts, we were able to close the year ahead of our latest guidance…in fiscal 2024 we are focusing on maximizing value with our retail partners and managing controllables,” Garth said in a statement Wednesday,