ScottsMiracle-Gro Reports First Quarter Results; Company Well Positioned for 2025 Lawn & Garden Season
- 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
MARYSVILLE, Ohio, Jan. 29, 2025 (GLOBE NEWSWIRE) — The Scotts Miracle-Gro Company (NYSE: SMG), the world’s largest marketer of branded consumer lawn and garden as well as a leader in indoor and hydroponic growing products, today announced its results for the first quarter ended December 28, 2024.
“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.
