ScottsMiracle-Gro Reduces Sales Outlook For Hawthorne & Non-GAAP Adjusted EPS, Management Remains Optimistic

The Scotts Miracle-Gro Company SMG has lowered its full-year sales guidance for its Hawthorne segment and said the reduction would likely lead to adjusted earnings per share that are lower than previously expected.

What Happened?

Speaking at the Raymond James 43^rd Annual Institutional Investors Conference, chief financial officer Cory Miller said the company now expects Hawthorne sales to decline 15 to 25%, including the benefit of acquisitions.

Sales in the segment have been challenged for several months due to an oversupply of cannabis, which is leading to a slowdown in both indoor and outdoor cultivation.

“We believe Hawthorne sales have found the bottom in terms of average daily volume," Miller explained. "However, there is a seasonal element to the business that would normally be in play by now that has not materialized to the extent we anticipated. While sales volume has begun to improve recently, the year-over-year rate of decline has expanded and that trend appears likely to carry through March."

What It Means

The revised Hawthorne sales outlook means ScottsMiracle-Gro is unlikely to reach the low end of its guidance for non-GAAP adjusted earnings per share.

Miller said management remains optimistic about the continued strength of the U.S. consumer segment and is working to moderate the earnings gap from the shortfall in Hawthorne sales with a goal of achieving non-GAAP adjusted earnings per share of at least $8.00.

"The midpoint for our sales guidance for our U.S. Consumer business continues to assume an 8-point decline in unit volume on a full-year basis and the business continues to significantly outperform against that plan," Miller explained. "Consumer purchases, in units, entering March are essentially flat from year-ago levels and shipments to retailers through five months are at record levels. Still, it is too early in the season to adjust our outlook for the business.”

Miller also said the company no longer expects a significant acquisition in fiscal 2022 to bolster its presence in the live goods category. It expects to provide a further update on May 3, 2022, when it releases its second quarter results.

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