Scotts Miracle-Gro Company · Q3 2023 earnings

Briefing

ScottsMiracle-Gro's financial performance declined due to Hawthorne's decrease, but U.S. Consumer sales increased slightly and POS dollars went up, with Project Springboard savings exceeding expectations. The company updated its full-year sales and earnings outlook and amended its credit agreement.

ScottsMiracle-Gro's third-quarter net sales decreased by 6% due to a 40% decline in the Hawthorne segment, although U.S. Consumer net sales increased by 1%. The company is focusing on expense reduction, cash flow improvement, and debt paydown, with expectations of achieving $1 billion in cash flow by the end of fiscal '24. Full-year sales and Adjusted EBITDA are expected to decline.

• Company-wide third quarter net sales decreased 6% due to Hawthorne decline of 40%; U.S. Consumer net sales increased 1% over prior year
• Consumer POS dollars up 8% in the third quarter and over 5% year to date
• Year-to-date cash flow improved over $700 million
• Total Project Springboard savings to exceed $300 million

Headline financials

Revenue & EPS history

The Company now expects total net sales to decline approximately 10 to 11 percent mainly driven by a net sales decline in the U.S. Consumer segment of 2 to 4 percent and a net sales decline of 30 to 35 percent in the Hawthorne segment. Additionally, operating income is expected to range from 7 to 7.5 percent of sales for the year. Including these revisions, full-year Adjusted EBITDA is expected below prior year by about 25 percent, and the resulting tax rate will move higher to 28 to 29 percent for the year. Expectations for interest expense and strong free cash flow generation remain unchanged.