ScottsMiracle-Gro Q1 Net Sales Decline 7% YoY, What About Adjusted EBITDA?

The Scotts Miracle-Gro Company SMG released results for its fiscal first quarter ended December 31, 2022, revealing net sales of $526.6 million, a 7% decrease compared to $566 million in the Q1 2022.

Q1 2023 Financial Highlights

• Gross margin was $95.7 million (18% of sales), a 19% decrease compared to $118.7 million (21% of sales) in Q1 2022.

• The company reported a GAAP loss of $64.7 million, or $1.17 per share, compared with a prior year loss of $50.0 million, or $0.90 per share.

• Adjusted EBITDA was $21.2 million compared to a loss of $1.2 million in the Q1 2022.

“The first quarter reflects our disciplined approach to reorient the business and strengthen the operational and financial performance of the company,” stated Jim Hagedorn, chairman and CEO. “We have further positioned ScottsMiracle-Gro for long-term growth and shareholder value. We are comfortably within our leverage requirement and expect to remain on this trajectory through the fiscal year. As for Project Springboard, we have line of sight to annualized savings above the initial $185 million target, creating opportunities to reinvest in the business.

“Record December shipments in the U.S. Consumer business contributed to a strong early season buildout demonstrating confidence in the lawn and garden season. Our focus now is on early consumer engagement and POS lifts in coordination with retail partners. While Hawthorne continues to manage through a challenging market, we are committed to returning the business to profitability by the end of this fiscal year. Overall, we are in a stable place and are well prepared to execute on our full-year plan.”

Fiscal 2023 Outlook
The company updated its outlook for fiscal 2023 as compared to fiscal 2022 as follows:

• 20 to 30 percent decline in Hawthorne segment net sales

• Low single-digit decline in total company net sales

• Low single-digit decline in gross margin rate

• Low single-digit percentage growth in adjusted operating income

• Low single-digit percentage growth in adjusted EBITDA

• Interest expense increase of approximately $60 million

• Effective tax rate of 26 to 27 percent

• Free cash flow of $1 billion over the next two years

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