Core Insights - Scotts Miracle-Gro reported revenue of $1.42 billion for the quarter ended March 2025, reflecting a 6.8% decline year-over-year and a surprise of -5.15% compared to the Zacks Consensus Estimate of $1.5 billion [1] - The company's EPS for the quarter was $3.98, an increase from $3.69 in the same quarter last year, resulting in an EPS surprise of +0.76% against the consensus estimate of $3.95 [1] Financial Performance - U.S. Consumer Net Sales were reported at $1.31 billion, below the average estimate of $1.37 billion, marking a year-over-year decrease of 5% [4] - Other Net Sales reached $76.80 million, slightly above the average estimate of $76.74 million, with a year-over-year decline of 3% [4] - Hawthorne Net Sales were significantly lower at $32.70 million, compared to the estimated $54.86 million, representing a drastic year-over-year decline of 50.8% [4] Segment Profitability - U.S. Consumer Segment Profit (Non-GAAP) was $392.50 million, slightly above the average estimate of $390.69 million [4] - Hawthorne Segment Profit (Non-GAAP) reported a loss of -$0.90 million, contrasting with the average estimate of a profit of $0.99 million [4] - Other Segment Profit (Non-GAAP) was $9 million, exceeding the average estimate of $2.80 million [4] - Corporate Segment Loss (Non-GAAP) was -$34.80 million, slightly worse than the average estimate of -$33.34 million [4] Stock Performance - Scotts' shares have returned -2.3% over the past month, underperforming the Zacks S&P 500 composite's -0.2% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance in the near term [3]

Financial Performance - Q2 2025 - Net sales decreased by 7% to $1.42 billion compared to Q2 2024[38] - Adjusted gross margin rate increased by 380 bps to 39.1%[38] - SG&A expenses increased by 5% to $188.3 million[38] - Adjusted net income increased to $232.2 million from $211.9 million[38] - Adjusted diluted EPS increased to $3.98 from $3.69[38] - Adjusted EBITDA increased to $402.8 million from $396.3 million[38] Strategic Focus & Outlook - The company is targeting mid-30s percent gross margin rate by the end of fiscal year 2027[25,42] - The company expects approximately $30 million of incremental cost savings[25] - The company anticipates $250 million expected free cash flow[42] - The company projects leverage below 3.5x adjusted EBITDA by the end of fiscal year 2027[25,42]

Financial Data and Key Metrics Changes - The company reaffirmed its full year EBITDA guidance of $570 million to $590 million despite a challenging macro environment [8][40] - Total company net sales for the quarter were $1.42 billion, down 7% from $1.53 billion a year ago [41] - U.S. Consumer net sales decreased 5% to $1.31 billion, reflecting a slower start to the lawn and garden season [41][44] - Year-to-date total net sales were $1.84 billion, down 5% from $1.94 billion a year ago [43] - Adjusted EBITDA improved from $396 million to $403 million in the second quarter [51] Business Line Data and Key Metrics Changes - The Garden business saw a 16% increase in POS units, while the Mulch business increased by 46% [13] - Hawthorne net sales declined 51% from $66 million to $33 million due to market softness and strategic exit from third-party distribution [43] - POS units exceeded prior year by 12.1%, driven by strong performance in mulch, soils, fertilizer, grass seed, and controls [45] Market Data and Key Metrics Changes - The company reported that 75% of consumers perceive lawn and garden care as essential, with 25% planning to shift to DIY this year [26] - Retailers are heavily promoting the company's products, which has positively impacted market share [22][65] Company Strategy and Development Direction - The company is focusing on a transformation strategy aimed at cost savings and productivity improvements, targeting $150 million in supply chain cost outs by fiscal 2027 [28][30] - The divestiture of the Hawthorne business is intended to improve gross margin and reduce volatility [28][33] - The company plans to roll out changes in product packaging and formulations to better meet consumer needs [18][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the consumer base, noting that the core consumer remains relatively healthy [10][25] - The company anticipates strong retailer replenishment in Q3 as weather conditions improve [42] - Management highlighted the importance of promotions and brand support in driving consumer engagement [23][24] Other Important Information - The company achieved a nearly 500 basis point recovery in gross margin and a $36 million EBITDA increase year-to-date [12][51] - The GAAP gross margin rate was 38.6% for the second quarter, compared to 30.4% in the prior year [49] Q&A Session Summary Question: Can you explain the difference between the 12% growth in units and the low single-digit growth in dollars? - Management indicated that the difference is largely due to a mix of product types and heavy retailer promotions driving unit sales [59][67] Question: What is the impact of consumers trading down to DIY? - Management views this as a potential opportunity rather than a negative, as many consumers take pride in DIY gardening [74][76] Question: What is the pricing gap between the company's products and private label? - Management noted that the pricing gap remains within the historical range of 20% to 30%, but promotional activities have helped close this gap [80][86] Question: Is there a risk of pantry loading among consumers? - Management expressed confidence that pantry loading is not a significant concern, as they are attracting new consumers to the category [89][94] Question: What is the outlook for Hawthorne's EBITDA guidance? - Management confirmed that while Hawthorne's revenue guidance has been withdrawn, the overall EBITDA guidance for the company remains unchanged [95][98]

Core Viewpoint - Scotts Miracle-Gro reported quarterly earnings of $3.98 per share, exceeding the Zacks Consensus Estimate of $3.95 per share, and showing an increase from $3.69 per share a year ago, indicating a positive earnings surprise of 0.76% [1] Financial Performance - The company posted revenues of $1.42 billion for the quarter ended March 2025, which was below the Zacks Consensus Estimate by 5.15%, and a decrease from $1.53 billion in the same quarter last year [2] - Over the last four quarters, Scotts has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Stock Performance - Scotts shares have declined approximately 19.3% since the beginning of the year, compared to a decline of 5.5% in the S&P 500 [3] - The current Zacks Rank for Scotts is 4 (Sell), indicating expectations of underperformance in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $2.12 on revenues of $1.22 billion, and for the current fiscal year, it is $3.40 on revenues of $3.54 billion [7] - The trend of estimate revisions for Scotts has been unfavorable ahead of the earnings release, which may impact future stock performance [6] Industry Context - The Agriculture - Operations industry, to which Scotts belongs, is currently ranked in the bottom 41% of over 250 Zacks industries, suggesting potential challenges for stock performance [8]

Financial Data and Key Metrics Changes - Total company net sales for Q2 2025 were $1.42 billion, down 7% from $1.53 billion a year ago [40] - U.S. Consumer net sales decreased 5% to $1.31 billion from $1.38 billion, attributed to a slower start to the lawn and garden season and non-repeating sales from the previous year [40] - Year-to-date total net sales were $1.84 billion, down 5% from $1.94 billion [41] - Adjusted EBITDA for Q2 improved to $403 million from $396 million, with a year-to-date increase of $36 million to $407 million [49] - GAAP net income for Q2 was $217.5 million or $3.72 per share, compared to $157.5 million or $2.74 per share a year ago [50] Business Line Data and Key Metrics Changes - The Garden business saw a 16% increase in POS units, while the Mulch business experienced a 46% increase [12] - POS units overall increased by 12.1%, with notable growth in mulch, soils, fertilizer, grass seed, and controls [42] - Hawthorne net sales declined 51% to $33 million, reflecting market softness and strategic exit from low-margin distribution [41] Market Data and Key Metrics Changes - The company reported that 75% of consumers view lawn and garden care as essential, with 25% planning to shift to DIY this year [25] - Retailers are heavily promoting the company's products, which has positively impacted market share [21] Company Strategy and Development Direction - The company is focused on transforming its cost structure and improving productivity, aiming for $150 million in supply chain cost savings by fiscal 2027 [29] - A strategic divestiture of the Hawthorne business is underway to reduce volatility and improve gross margins [27] - The company plans to roll out changes in product packaging and formulations in fiscal 2026 and 2027 to better meet consumer needs [18] Management's Comments on Operating Environment and Future Outlook - Management reaffirmed full-year EBITDA guidance of $570 million to $590 million, citing strong consumer takeaway and market share gains [7] - The company remains confident in its ability to navigate the current macroeconomic environment, with minimal exposure to tariffs [23] - Management expressed optimism about the resilience of the consumer base, noting that homeowners have more disposable income [25] Other Important Information - The company has achieved a nearly 500 basis point recovery in gross margin, with a target of 30% gross margin rate by fiscal year-end [46] - The company has reduced debt and interest expenses, with total debt down $270 million year-over-year [49] Q&A Session Summary Question: Can you explain the difference between the 12% growth in units and the low single-digit growth in dollars? - Management indicated that the difference is largely due to a mix of product types and heavy retailer promotions driving unit sales, while dollar growth is slower due to pricing strategies [56][60][62] Question: What is the impact of consumers trading down to DIY? - Management views this as a potential positive, as many consumers take pride in gardening and may find DIY solutions more cost-effective [72][74] Question: What is the pricing gap between the company's products and private labels? - Management noted that the pricing gap remains around the historical 20% to 30%, but promotional activities have helped close this gap [78][82] Question: Is there a risk of pantry loading among consumers? - Management does not see significant risk of pantry loading, citing strong early season performance and new consumer engagement [85][89] Question: What is the outlook for Hawthorne's EBITDA guidance? - Management did not adjust the total company EBITDA guidance despite Hawthorne's underperformance, citing strong gross margin improvements and cost-saving measures [90][92]

Financial Results - The Scotts Miracle-Gro Company reported preliminary financial results for the three and six months ended March 29, 2025[4]. - The report includes a news release issued on April 28, 2025, detailing financial performance[9]. Clarifications - The news release clarifies statements made by the Company's Chairman and CEO during an appearance on CNBC Mad Money[4]. - No financial statements of businesses acquired were applicable in this report[5].

Core Viewpoint - The Scotts Miracle-Gro Company reported a decline in sales for the second quarter of fiscal 2025, but showed improvements in gross margin and net income, reaffirming its financial guidance for the U.S. Consumer segment while withdrawing revenue guidance for the Hawthorne segment due to uncertainties in the cannabis industry [4][9][10]. Financial Performance - Total sales for the second quarter were $1.42 billion, a 7% decrease from $1.53 billion in the prior year [4]. - U.S. Consumer sales decreased by 5% to $1.31 billion, attributed to a slower start to the lawn and garden season and non-repeating sales from fiscal 2024 [4]. - GAAP net income was $217.5 million, or $3.72 per diluted share, compared to $157.5 million, or $2.74 per diluted share, in the same quarter last year, marking a 38% increase [6][17]. - Non-GAAP adjusted net income for the quarter was $232.2 million, or $3.98 per diluted share, up from $211.9 million, or $3.69 per diluted share, a 10% increase [6][17]. Margin and Cost Management - GAAP gross margin rate improved to 38.6%, up from 30.4% in the prior year, while non-GAAP adjusted gross margin rate was 39.1%, compared to 35.3% [5][10]. - The improvement in gross margin was primarily due to lower material, manufacturing, and distribution costs, as well as an improved product mix [5]. Segment Performance - U.S. Consumer segment net sales for the quarter were $1.31 billion, down 5% year-over-year, while the Hawthorne segment saw a significant decline of 51% to $32.7 million [19]. - The Other segment reported a slight decrease of 3% in net sales to $76.8 million [19]. Outlook and Guidance - The company reaffirmed its guidance for U.S. Consumer segment net sales, adjusted gross margin, adjusted EBITDA, and free cash flow [9][10]. - Due to uncertainties in the cannabis industry, the company is no longer providing full-year revenue guidance for the Hawthorne segment [9]. Cash Flow and Debt Management - The company is focused on driving significant free cash flow and debt paydown while making incremental investments in consumer activation programs [8]. - Net leverage improved to 4.41x, down from 6.95x in the prior year [10]. Consumer Trends - Consumer purchases measured through point-of-sale (POS) data showed double-digit increases in consumer takeaway for the second consecutive quarter, indicating strong consumer health [3]. - The company expects 60% of full-year consumer takeaway to occur in the third quarter [10].

Core Viewpoint - The Scotts Miracle-Gro Company is experiencing strong consumer demand leading up to the peak lawn and garden season, as announced by Chairman and CEO Jim Hagedorn during a CNBC appearance [1]. Group 1: Sales Performance - The company has achieved strong point-of-sale (POS) unit growth through joint promotions and consumer activation programs with retailers [2]. - Sales for the first half of the fiscal year are reported to be up double digits, with POS units also increasing by double digits [2]. Group 2: Upcoming Financial Disclosure - The company will disclose its financial results, including sales, for the second quarter and first half of the fiscal year on April 30, prior to the opening of U.S. financial markets [3]. - A video presentation will be hosted via webcast at 9 a.m. ET, followed by an audio question-and-answer session [3].

Core Points - Scotts Miracle-Gro Company will release its second quarter financial results on April 30, 2025, before U.S. market opening [1] - A video presentation will be hosted at 9:00 a.m. ET, followed by an audio question-and-answer session [1] - The company is the largest marketer of branded consumer lawn and garden products, with approximately $3.6 billion in sales [3] Company Overview - Scotts Miracle-Gro's brands, including Scotts®, Miracle-Gro®, and Ortho®, are market leaders in their respective categories [3] - The Hawthorne Gardening Company, a wholly-owned subsidiary, specializes in indoor and hydroponic growing products [3] Investor Information - Investors can register for the webcast to participate in the presentation and Q&A session [2] - A replay of the conference call will be available on the company's investor website for at least 12 months [2]

Core Insights - Scotts Miracle-Gro Company (SMG) has transferred its fully-owned subsidiary, The Hawthorne Collective, Inc., to an independent partner as part of a broader strategy to separate its cannabis-adjacent subsidiaries [1][3]. Company Strategy - The Hawthorne Collective was established in 2021 to invest in the cannabis industry, distinct from SMG's other subsidiary, Hawthorne Gardening Company, which focuses on cultivation products [2]. - The transfer is intended to reduce the impact of cannabis industry volatility on SMG's stock performance and to enhance shareholder value by allowing more investment in its core lawn and garden operations [3]. Financial Terms - The transfer agreement includes an interest-bearing promissory note, and SMG retains the option to repurchase The Hawthorne Collective or its assets if federal cannabis legalization occurs [4]. Financial Performance - Over the past year, SMG's shares have declined by 27.4%, compared to a 9.6% decline in the industry [6]. - For fiscal 2025, SMG expects an adjusted gross margin of around 30% and adjusted EBITDA to range from $570 million to $590 million, with U.S. consumer net sales projected to grow in low single digits [7].