- U.S. Consumer net sales increased 11 percent driven by strong fall lawn and garden campaign and retailer support for 2025 spring season
- Consumer POS, which represents less than 10 percent of the full-year, was up 12 percent in dollars and 13 percent in units
- GAAP gross margin rate of 22.7 percent improved 750 bps; Non-GAAP adjusted gross margin rate of 24.0 percent improved 1,030 bps
- Non-GAAP Adjusted EBITDA of $4 million reflected $30 million improvement
- GAAP loss of $1.21 per share and non-GAAP adjusted loss of $0.89 per share improved $0.21 and $0.56 per share, respectively
- Company reaffirms full-year sales, adjusted gross margin and adjusted EBITDA guidance; lowers interest expense guidance
"We've had a solid start to the fiscal year driven by robust performance in our U.S. Consumer business,” said Jim Hagedorn, chairman and CEO. "The year-over-year improvement in both shipments and POS is the result of strong retailer optimism for the upcoming lawn and garden season coupled with exceptional consumer engagement through the fall.
"Retailers continued to build healthy inventories, and our increased investments in promotional activity, media and marketing drove consumer takeaway across our leading brands. The operational restructuring within Hawthorne yielded significant benefits as well, enabling it to contribute positively to adjusted EBITDA during the quarter. These initial results reaffirm our confidence in this year's guidance and demonstrate continued progress toward our mid-term growth plan that includes EBITDA approaching $700 million by the close of fiscal 2027.”
Mark Scheiwer, interim chief financial officer and chief accounting officer, added, "While still early in our fiscal year, we delivered significant improvement in the key financial metrics that are central to our 2025 guidance. Year-over-year improvements in gross margin and lower debt levels show we have made meaningful progress in strengthening the balance sheet and are on a path to reach our full-year net debt to adjusted EBITDA goal. Although the first quarter historically is a small percentage of our annual sales and POS volume, our performance demonstrates solid retailer and consumer support for the category and our franchise as we prepare for the peak lawn and garden season starting in the second quarter.”
First Quarter Highlights
For the quarter ended December 28, 2024, total Company sales of $416.8 million were up slightly from prior year sales of $410.4 million. Due to the seasonal nature of the business, the first quarter typically represents less than 15 percent of full-year sales.
U.S. Consumer net sales increased 11 percent, to $340.9 million from $306.7 million in the same period last year, driven by a strong fall season across all categories and early retailer load-in for the spring season. Hawthorne segment sales decreased 35 percent, to $52.1 million, compared to $80.1 million last year. The decline was expected due to Hawthorne's strategic exit from third-party distribution as of April 1, 2024.
GAAP and non-GAAP adjusted gross margin rates for the quarter were 22.7 percent and 24.0 percent, respectively, which compared to 15.2 percent and 13.7 percent, respectively, in the prior year. The improvements were primarily attributable to lower material costs, favorable fixed-cost leverage, lower distribution costs following fiscal 2024 warehouse closures, and improved product mix related to Hawthorne's transition from selling third-party products.
SG&A was up 9 percent, to $124.8 million, during the quarter compared to $114.8 million a year ago. The Company's commitment to ramp up current year investments in people, marketing and innovation for the long-term health of the business drove the increase. Other expense was $4.5 million in the quarter, an increase of $2.7 million over prior year, primarily the result of higher discount costs from increased usage of the accounts receivable sale facility.
Interest expense declined 21 percent, to $33.7 million, mainly related to a lower debt balance compared to the prior year. The Company now expects interest expense for the full year to be $15 million to $20 million lower than prior year, reflecting continued strong cash flow generation and working capital management.
Non-GAAP adjusted EBITDA for the quarter was positive $3.8 million compared to a loss of $25.8 million a year ago. The improvement reflects the significant margin recovery in both major business segments and strong fall results in U.S. Consumer as well as earlier phasing of first half shipments ahead of the spring season.
The Company reported a GAAP net loss of $69.5 million, or $1.21 per share, compared with a prior year loss of $80.5 million, or $1.42 per share. Non-GAAP adjusted net loss, which excludes impairment, restructuring and other non-recurring items, improved to $51.0 million, or $0.89 per share, for the quarter, compared with a loss of $82.2 million, or $1.45 per share, a year ago.
Included within the Company's GAAP net loss before income taxes for the first quarter is $21.7 million in impairment, restructuring and other non-recurring items related to executive and employee severance, recognition of valuation losses related to the RIV Capital investment upon the successful completion of its merger with Cansortium and costs related to the previously announced Project Springboard cost-reduction initiative. As part of the merger, the Company exchanged its RIV Capital convertible notes for non-voting exchangeable shares in the combined Cansortium entity for future value-creation opportunities.
The Company also reported continued balance sheet improvements with the average net debt to adjusted EBITDA leverage ratio at the end of the quarter declining to 4.52 times adjusted EBITDA from 4.86 times last quarter, well within the covenant maximum of 5.5 times and on a path to the low 4's by fiscal year-end.
Fiscal 2025 Outlook
The Company reaffirms the non-GAAP fiscal 2025 guidance for key elements of non-GAAP adjusted EBITDA provided last quarter and lowers expected interest expense. Highlights include:
- U.S. Consumer net sales low single-digit growth (excluding non-repeat sales for AeroGarden and bulk raw material sales)
- Hawthorne net sales mid-single digit decrease
- Non-GAAP adjusted gross margin of approximately 30 percent
- Non-GAAP adjusted EBITDA of $570 million to $590 million
- Interest expense $15 million to $20 million lower than prior year, previously a $10 million decrease
The Company will discuss results during a video presentation via webcast today at 9 a.m. ET. To watch the Company presentation and listen to the question-and-answer session, please register in advance at this webcast link. For those planning to participate in the question-and-answer session that follows the video presentation, please register for the webcast to view the presentation in addition to registering in advance via this audio link to receive call-in details and a unique PIN. A replay of the conference call will also be available on the Company's investor website where an archive of the press release and any accompanying information will remain available for at least a 12-month period.
Net Sales Details
| Fiscal First Quarter (October - December 2024) | |||||
| Net Sales Drivers (1) | Volume & Mix | Foreign Exchange | Price(2) | Other(3) | Net Sales |
| U.S. Consumer | 18% | -% | -1% | -6% | 11% |
| Hawthorne | -16% | -% | -1% | -18% | -35% |
| Other | 6% | -3% | -% | -2% | 1% |
| Total SMG | 11% | -% | -1% | -8% | 2% |
(2) Price represents changes to the invoiced price charged to customers, net of investment in customer promotional activities such as seasonal and yearly promotions, customer incentives and rebate programs.
(3) Other represents the impact of rounding and nonrecurring sales from the prior year which mainly include U.S. Consumer's bulk raw material and AeroGarden sales, Hawthorne's third party distributed sales, and Canada's AeroGarden sales.
About ScottsMiracle-Gro
With approximately $3.6 billion in sales, the Company is the world's largest marketer of branded consumer products for lawn and garden care. The Company's brands are among the most recognized in the industry. The Company's Scotts®, Miracle-Gro®, and Ortho® brands are market-leading in their categories. The Company's wholly-owned subsidiary, The Hawthorne Gardening Company, is a leading provider of nutrients, lighting, and other materials used in the indoor and hydroponic growing segment. For additional information, visit us at www.scottsmiraclegro.com.
Cautionary Note Regarding Forward-Looking Statements
Statements contained in this press release, other than statements of historical fact, which address activities, events and developments that the Company expects or anticipates will or may occur in the future, including, but not limited to, information regarding the future economic performance and financial condition of the Company, the plans and objectives of the Company's management, and the Company's assumptions regarding such performance and plans are "forward-looking statements” within the meaning of the U.S. federal securities laws that are subject to risks and uncertainties. These forward-looking statements generally can be identified as statements that include phrases such as "guidance,” "outlook,” "projected,” "believe,” "target,” "predict,” "estimate,” "forecast,” "strategy,” "may,” "goal,” "expect,” "anticipate,” "intend,” "plan,” "foresee,” "likely,” "will,” "should” or other similar words or phrases. Actual results could differ materially from the forward-looking information in this release due to a variety of factors, including, but not limited to:
- An economic downturn and economic uncertainty may adversely affect demand for the Company's products;
- The Company's operations, financial condition or reputation may be impaired if its information or operational technology systems fail to perform adequately or if it is the subject of a data breach or cyber-attack;
- The highly competitive nature of the Company's markets could adversely affect its ability to maintain or grow revenues;
- In the event of a disaster, the Company's disaster recovery and business continuity plans may fail, which could adversely interrupt its operations;
- Climate change and unfavorable weather conditions could adversely impact financial results;
- The Company may not successfully develop new product lines and products or improve existing product lines and products;
- The Company's indebtedness could limit its flexibility and adversely affect its financial condition;
- If the Company underestimates or overestimates demand for its products and does not maintain appropriate inventory levels, its net sales and/or working capital could be negatively impacted;
- Disruptions in availability or increases in the prices of raw materials, fuel or transportation costs could adversely affect the Company's results of operations;
- A significant interruption in the operation of the Company's or its suppliers' facilities could impact the Company's capacity to produce products and service its customers, which could adversely affect the Company's revenues and earnings;
- Acquisitions, other strategic alliances and investments could result in operating difficulties, dilution and other harmful consequences that may adversely impact the Company's business and results of operations;
- Compliance with environmental and other public health regulations or changes in such regulations or regulatory enforcement priorities could increase the Company's costs of doing business or limit its ability to market all of its products;
- Because of the concentration of the Company's sales to a small number of retail customers, the loss of one or more of, or significant reduction in orders from, its top customers, or a material reduction in the inventory of the Company's products that they carry, could adversely affect the Company's financial results;
- If the perception of the Company's brands or organizational reputation are damaged, its consumers, distributors and retailers may react negatively, which could materially and adversely affect the Company's business, financial condition and results of operations; and
- Hagedorn Partnership, L.P. beneficially owns approximately 23% of the Company's common shares and can significantly influence decisions that require the approval of shareholders.
For investor inquiries:
Brad Chelton
Vice President
Treasury, Tax and Investor Relations
(937) 309-2503
For media inquiries:
Tom Matthews
Chief Communications Officer
(937) 844-3864
| THE SCOTTS MIRACLE-GRO COMPANY Condensed Consolidated Statements of Operations (In millions, except per share data) (Unaudited) | ||||||||||||||
| Three Months Ended | ||||||||||||||
| Footnotes | December 28, 2024 | December 30, 2023 | % Change | |||||||||||
| Net sales | $ | 416.8 | $ | 410.4 | 2 | % | ||||||||
| Cost of sales | 316.9 | 354.0 | ||||||||||||
| Cost of sales-impairment, restructuring and other | 5.1 | (5.8 | ) | |||||||||||
| Gross margin | 94.8 | 62.2 | 52 | % | ||||||||||
| % of sales | 22.7 | % | 15.2 | % | ||||||||||
| Operating expenses: | ||||||||||||||
| Selling, general and administrative | 124.8 | 114.8 | 9 | % | ||||||||||
| Impairment, restructuring and other | 16.5 | (7.1 | ) | |||||||||||
| Other expense, net | 4.5 | 1.8 | ||||||||||||
| Loss from operations | (51.0 | ) | (47.3 | ) | (8 | )% | ||||||||
| % of sales | (12.2 | )% | (11.5 | )% | ||||||||||
| Equity in loss of unconsolidated affiliates | 9.9 | 22.5 | ||||||||||||
| Interest expense | 33.7 | 42.8 | ||||||||||||
| Other non-operating expense, net | 1.3 | 1.6 | ||||||||||||
| Loss before income taxes | (95.9 | ) | (114.2 | ) | 16 | % | ||||||||
| Income tax benefit | (26.4 | ) | (33.7 | ) | ||||||||||
| Net loss | $ | (69.5 | ) | $ | (80.5 | ) | 14 | % | ||||||
| Basic net loss per common share | (1) | $ | (1.21 | ) | $ | (1.42 | ) | 15 | % | |||||
| Diluted net loss per common share | (2) | $ | (1.21 | ) | $ | (1.42 | ) | 15 | % | |||||
| Common shares used in basic net loss per share calculation | 57.3 | 56.7 | 1 | % | ||||||||||
| Common shares and potential common shares used in diluted net loss per share calculation | 57.3 | 56.7 | 1 | % | ||||||||||
| Non-GAAP results: | ||||||||||||||
| Adjusted net loss | (3) | $ | (51.0 | ) | $ | (82.2 | ) | 38 | % | |||||
| Adjusted diluted net loss per common share | (2) (3) | $ | (0.89 | ) | $ | (1.45 | ) | 39 | % | |||||
| Adjusted EBITDA | (3) | $ | 3.8 | $ | (25.8 | ) | 115 | % | ||||||
| Note: See accompanying footnotes. | ||||||||||||||
| THE SCOTTS MIRACLE-GRO COMPANY Segment Results (In millions) (Unaudited) | ||||||||||||||
The performance of each reportable segment is evaluated based on several factors, including income (loss) before income taxes, amortization, impairment, restructuring and other charges ("Segment Profit (Loss)”), which is a non-GAAP financial measure. Senior management uses Segment Profit (Loss) to evaluate segment performance because they believe this measure is indicative of performance trends and the overall earnings potential of each segment.
The following tables present financial information for the Company's reportable segments for the periods indicated:
| Three Months Ended | |||||||||||
| December 28, 2024 | December 30, 2023 | % Change | |||||||||
| Net Sales: | |||||||||||
| U.S. Consumer | $ | 340.9 | $ | 306.7 | 11 | % | |||||
| Hawthorne | 52.1 | 80.1 | (35 | )% | |||||||
| Other | 23.8 | 23.6 | 1 | % | |||||||
| Consolidated | $ | 416.8 | $ | 410.4 | ()[\]\\.,;:\s@\"]+)*)|(\".+\"))@((\[[0-9]{1,3}\.[0-9]{1,3}\.[0-9]{1,3}\.[0-9]{1,3}\])|(([a-zA-Z\-0-9]+\.)+[a-zA-Z]{2,}))$/;return b.test(a)}$(document).ready(function(){if(performance.navigation.type==2){location.reload(true)}$("iframe[data-lazy-src]").each(function(b){$(this).attr("src",$(this).attr("data-lazy-src"))});if($(".owl-article-body-images").length){$(".owl-article-body-images").owlCarousel({items:1,loop:true,center:false,dots:false,autoPlay:true,mouseDrag:false,touchDrag:false,pullDrag:false,nav:true})}var a=$("#display_full_text").val();if(a==0){$.ajax({url:"/ajax/set-article-cookie",type:"POST",data:{cmsArticleId:$("#cms_article_id").val()},dataType:"json",success:function(b){},error:function(b,d,c){}})}$(".read-full-article").on("click",function(d){d.preventDefault();var b=$(this).attr("data-cmsArticleId");var c=$(this).attr("data-productId");var f=$(this).attr("data-href");dataLayer.push({event:"paywall_click",paywall_name:"the_manila_times_premium",paywall_id:"paywall_article_"+b});$.ajax({url:"/ajax/set-article-cookie",type:"POST",data:{cmsArticleId:b,productId:c},dataType:"json",success:function(e){window.location.href=$("#BASE_URL").val()+f},error:function(e,h,g){}})});$(".article-embedded-newsletter-form .close-btn").on("click",function(){$(".article-embedded-newsletter-form").fadeOut(1000)})});$(document).on("click",".article-embedded-newsletter-form .newsletter-button",function(){var b=$(".article-embedded-newsletter-form .newsletter_email").val();var d=$("#ga_user_id").val();var c=$("#ga_user_yob").val();var a=$("#ga_user_gender").val();var e=$("#ga_user_country").val();if(validateEmail(b)){$.ajax({url:"/ajax/sendynewsletter",type:"POST",data:{email:b},success:function(f){$(".article-embedded-newsletter-form .nf-message").html(f);$(".article-embedded-newsletter-form .nf-message").addClass("show");setTimeout(function(){$(".article-embedded-newsletter-form .nf-message").removeClass("show");$(".article-embedded-newsletter-form .nf-message").html("")},6000);dataLayer.push({event:"newsletter_sub",user_id:d,product_name:"newsletter",gender:a,yob:c,country:e})},error:function(f,h,g){}})}else{$(".article-embedded-newsletter-form .nf-message").html("Please enter a valid email address.");$(".article-embedded-newsletter-form .nf-message").addClass("show");setTimeout(function(){$(".article-embedded-newsletter-form .nf-message").removeClass("show");$(".article-embedded-newsletter-form .nf-message").html("")},6000)}});$(document).on("click",".article-embedded-newsletter-form .nf-message",function(){$(this).removeClass("show");$(this).html("")});
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