Scotts Miracle-Gro (NYSE:SMG), announced record second-quarter sales in its U.S. consumer segment driven by continued support from its major retail partners. The growth was offset by an expected decline in Hawthorne sales, leading to company-wide sales that were 8 percent lower than the same period a year ago.
For the quarter ended April 2, 2022, GAAP earnings from continuing operations were $4.94 per diluted share compared with $5.44 per diluted share in the prior year.
On a fiscal year-to-date basis entering May, consumer purchases of the company’s lawn and garden products at its largest four retailers in the U.S. are down 12 percent from the same period a year ago. The company said the category gained significant momentum in recent weeks after a late break to spring and planned delays of promotional activity until after the Easter holiday.
“Spring weather, frankly, has been lousy in most markets and the season broke about two to three weeks later than normal,” stated Jim Hagedorn, chairman and CEO. “Fortunately, consumer purchases have gained considerable ground in recent weeks. For example, key early-breaking markets in the south are down mid-single digits entering May after being down double digits two weeks earlier. The combination of improved weather, strong retailer promotions through Memorial Day, and favorable comparisons for the balance of the season should be tailwinds for the rest of the year. Still, we now believe the low end of our sales guidance range for U.S. Consumer of plus-or-minus 2 percent from last year’s performance is our most likely outcome.”
The company said its previous guidance of $8 or more of non-GAAP adjusted earnings per share is likely unattainable. Management currently expects to provide an update to the investment community the week of June 6, 2022.
Second-quarter details
For the fiscal second quarter, the company reported sales of $1.68 billion, down 8 percent from $1.83 billion a year earlier. U.S. consumer segment sales increased slightly to $1.38 billion. Sales for the Hawthorne segment decreased 44 percent to $202.6 million.
The company-wide gross margin rate was 35.1 percent on a GAAP basis and 35.4 percent on a non-GAAP adjusted basis compared with a rate of 36 percent and 36.6 percent, respectively, a year ago. As expected, while higher commodity and distribution costs were largely offset by pricing, lower fixed cost leverage was the primary cause of the decline.
On a company-wide basis, GAAP income from continuing operations was $276.5 million, or $4.94 per diluted share compared with $311.1 million, or $5.44 per diluted share for the second quarter of fiscal 2021.
Year-to-date details
For the first six months of fiscal 2022, the company reported sales of $2.24 billion, down 13 percent from $2.58 billion a year earlier. U.S. consumer segment sales decreased 3 percent to $1.72 billion. Sales for the Hawthorne segment decreased 42 percent to $393.2 million.
The company-wide gross margin rate was 31.5 percent on a GAAP basis and 31.7 percent on a non-GAAP adjusted basis compared with a rate of 32.9 percent and 33.7 percent, respectively, a year ago. SG&A decreased 8 percent to $358.7 million.
On a company-wide basis, GAAP income from continuing operations was $226.4 million, or $4.02 per diluted share, compared with $336.2 million, or $5.88 per diluted share, for the first six months of fiscal 2021.
Acquisition of Cyco
Separately, the company announced that Hawthorne has acquired Australia-based Cyco, for $34 million plus contingent consideration of up to $10 million. The transaction marks the fifth Hawthorne acquisition in the past year.
Cyco is a brand of premium nutrients, additives and growing media products used by growers of all sizes in the hydroponic market. Hawthorne has been the exclusive U.S. distributor of Cyco products, which also are sold primarily in Canada and Australia through select retailers and distributors.
The company will discuss these results during a webcast and conference call on May 3, at 9:00 a.m. ET.
Photo: Courtesy of Mackenzie Marco on Unsplash
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