The Scotts Miracle-Gro Q3 FY23 Net Sales Decline 6% YoY, Here Are The Details

The Scotts Miracle-Gro Company SMG released its results for the third quarter ended July 1, 2023, revealing net sales decreased 6% to $1.12 billion from $1.19 billion in Q3 2022. Hawthorne segment sales decreased 40% to $93.4 million, compared with $154.5 million during the same period last year.

Q3 FY 2023 Financial Highlights

• Gross profit was $205.9 million, a 13% decrease compared to $236.6 million in Q3 2022.

• Gross margin was 18.4% compared to 19.9% in Q3 2022.

• Net income was $43.7 million, or $0.77 per diluted share, compared with a prior year loss of $443.9 million, or $8.01 per diluted share.

• Adjusted EBITDA was $127 million, compared to $194.5 million in Q3 2022.

“Regional weather extremes, inflationary pressures and price elasticity contributed to declines in retail foot traffic and volume,” stated Jim Hagedorn, chairman and CEO. “Despite these challenges, POS dollars are up, and we’ve had market share gains. This is a testament to the power of our consumer franchise. For a variety of reasons, Lawns has not performed to expectations. With up to a third of our Lawns business in the fall, we are investing in aggressive consumer activation programs to narrow the delta.”

“Just as importantly, we’ve strengthened the company through expense reduction, cash flow improvement and debt paydown. We are on target for $1 billion in cash flow by the end of fiscal ‘24. Looking ahead, our amended credit facility provides room to meaningfully reduce debt while directing investments into the core business. In Hawthorne, we have line of sight to profitability and opportunities to leverage our leading positions in the multi-billion dollar cannabis space.”

Full-year outlook
The company now expects total net sales to decline approximately 10% to 11% mainly driven by a net sales decline in the U.S. consumer segment of 2% to 4% and a net sales decline of 30% to 35% in the Hawthorne segment. Additionally, operating income is expected to range from 7% to 7.5% of sales for the year. Including these revisions, full-year adjusted EBITDA is expected below prior year by about 25%, and the resulting tax rate will move higher to 28% to 29% for the year. Expectations for interest expense and strong free cash flow generation remain unchanged.

Quarterly Dividend Payment

The company’s board of directors has approved the payment of a cash dividend of $0.66 per share. The dividend is payable on September 8, 2023, to shareholders of record as of August 25, 2023.

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Photo by Giorgio Trovato on Unsplash