Scotts Miracle-Gro(US:SMG)2024-11-06 19:53Financial Data and Key Metrics Changes - In fiscal '24, the company achieved adjusted EBITDA growth of 20%, finishing at $539 million, despite a challenging lawn and garden market [10][35] - Total company net sales increased 11% for the quarter, with full-year sales essentially flat at $3.55 billion [32] - Full-year adjusted earnings per share improved nearly 90% to $2.29 versus $1.21 in fiscal '23 [36] Business Line Data and Key Metrics Changes - U.S. consumer sales increased 54% in the fourth quarter, driven by timing of shipments and fall load-in to retailers, with full-year sales ending 6% higher than the prior year [32][33] - At Hawthorne, sales declined 46% in the fourth quarter and 37% for the full year, aligning with the decision to exit third-party distribution [34] Market Data and Key Metrics Changes - Retailer inventories are in a good place, with POS units up about 10% for the fiscal year, driven by gardens and controls [32] - POS units across the portfolio were up nearly 9% in fiscal '24 [10] Company Strategy and Development Direction - The company aims for consistent growth averaging 3% annually, with a focus on brand investment and margin improvement [8] - A strategic pivot was made in Hawthorne to focus on profitable owned brands, resulting in consecutive quarters of positive EBITDA for the first time in two years [12] - The company plans to invest over $200 million annually in advertising and marketing to support growth [8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in consumer sentiment and pricing pressures but expressed confidence in achieving growth through strategic investments and operational efficiencies [15][20] - The company expects EBITDA of $570 million to $590 million in fiscal '25, representing a 6% to 9% increase over fiscal '24 [20][41] Other Important Information - The decision to discontinue AeroGarden was made due to its lack of profitability, allowing the company to focus on more strategic investments [18] - The company generated over $580 million in free cash flow in fiscal '24, contributing to debt reduction of $390 million [37] Q&A Session Summary Question: Clarification on top-line guidance for U.S. consumer business - Management indicated that one-time items, including AeroGarden sales and inventory balancing, will not repeat, but core branded products are expected to see low single-digit growth [45][46] Question: Clarification on EBITDA target - Management confirmed the goal of $700 million in EBITDA by fiscal '27, with a focus on reducing leverage to approximately 3x [50][51] Question: Margin expansion challenges - Management acknowledged that while pricing may be less of a component for margin recovery, other drivers such as innovation and cost reductions will be pursued [54][55] Question: Incremental investment allocation - The majority of the increased investment will go towards brand support, with a smaller portion allocated to building midterm capacity [63][65]