{"id":754158,"date":"2023-05-03T07:24:04","date_gmt":"2023-05-03T11:24:04","guid":{"rendered":"https:\/\/www.marketnewsdesk.com\/index.php\/scottsmiracle-gro-reports-fiscal-2023-second-quarter-results\/"},"modified":"2023-05-03T07:24:04","modified_gmt":"2023-05-03T11:24:04","slug":"scottsmiracle-gro-reports-fiscal-2023-second-quarter-results","status":"publish","type":"post","link":"https:\/\/www.marketnewsdesk.com\/index.php\/scottsmiracle-gro-reports-fiscal-2023-second-quarter-results\/","title":{"rendered":"ScottsMiracle-Gro Reports Fiscal 2023 Second Quarter Results"},"content":{"rendered":"
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\n
\n U.S. Consumer First Half Sales of $1.73B in Line with Record Prior Two Years<\/em>
\n <\/strong>\n <\/p>\n

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\n Fiscal 2Q23 GAAP EPS of $1.94; non-GAAP Adjusted EPS of $3.78<\/em>
\n <\/strong>\n <\/p>\n

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\n Net Leverage Ratio within Covenant at 6.0X<\/em>
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\n Project Springboard to Deliver Annualized Savings Over $200 million<\/em>
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\n Updated Full Year Outlook to be Provided in June<\/em>
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MARYSVILLE, Ohio, May 03, 2023 (GLOBE NEWSWIRE) — The Scotts Miracle-Gro Company (NYSE: SMG), the world\u2019s leading marketer of branded consumer lawn and garden as well as indoor and hydroponic growing products, today announced results for its fiscal second quarter ended April 1, 2023.<\/p>\n

\u201cFiscal 2023 is a testament to the powerful franchise of our core lawn and garden business,\u201d said Jim Hagedorn, chairman and CEO. \u201cOur work has been marked by record retailer shipments, POS lifts and reliable cash generation. We are de-levering as planned and enhancing our ability to invest in growth and long-term shareholder value.<\/p>\n

\u201cLooking ahead, our collaboration with retailers is tighter than ever and our combined promotional activities will keep consumers engaged through the season. The bigger story is we\u2019re moving toward the transition phase of our recovery with more freedom to operate.\u201d<\/p>\n

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\n Second Quarter Highlights<\/u>
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U.S. Consumer net sales decreased 2 percent versus record high sales in the same period last year, bringing first half 2023 sales just ahead of prior year and within 3 percent of the Company\u2019s record first half in 2021. The Company said this reflects the strong partnership with retailers on first half load-in and unparalleled execution by ScottsMiracle-Gro operators and associates. For the U.S. Consumer business, the first half of the fiscal year typically comprises 55 to 60 percent of full-year net sales but less than 30 percent of POS.<\/p>\n

After a slow start through March, partly driven by extreme weather in the West, the U.S. Consumer business saw improved consumer demand entering May. Even in the uncertain macroeconomic environment, consumers remain engaged in lawn and garden and are reacting positively to the Company\u2019s branded promotions, especially where weather has been favorable. The DayLawn Saving and Scott for Scotts marketing campaigns and more recent in-store activities such as Spring Black Friday and SpringFest events have helped drive earlier consumer engagement. Based on the mix of consumer takeaway through April, the Company expects full-year POS volume to meet original expectations based on stronger performance in growing media and premium lawn fertilizers, offset by lower volumes in grass seed and private-label fertilizers. With strong productivity and cost savings from Project Springboard, the total company gross margin rate is still expected to approximate a 100 basis point decline year over year despite the shift in category mix and increased trade investments.<\/p>\n

At Hawthorne, the team remains focused on cost control and restructuring efforts. During the quarter, Hawthorne further optimized its distribution network by initiating the closure of four distribution centers. Additionally, the non-core Hurricane branded fans business was sold. The Company recorded pre-tax restructuring charges of $141 million in the quarter associated with these activities.<\/p>\n

\u201cThe Hawthorne team has shown resilience through sustained industry challenges, and I commend them for overdelivering on our original Project Springboard targets and remaining focused on strategic execution,\u201d said Matt Garth, executive vice president and chief financial officer. \u201cWhile we still expect daily sales rates to improve in the back half of the year, continued industry challenges make it difficult to provide topline guidance today. Instead, our full focus remains on cost control and getting back to run rate profitability by fiscal year-end. In recognition of the prevailing headwinds, we now expect a mid-single-digits percentage decline in total Company operating income and a low single-digits percentage decline in adjusted EBITDA for the full year.\u201d<\/p>\n

The Company reported GAAP income of $1.94 per diluted share for the quarter. Non-GAAP adjusted earnings, the basis of the Company\u2019s guidance, was $3.78 per diluted share.<\/p>\n

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\n Financial Results<\/u>
\n <\/strong>\n <\/p>\n

\n Second Quarter Details<\/strong>
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For the quarter ended April 1, 2023, company-wide sales decreased 9 percent to $1.53 billion. U.S. Consumer segment sales decreased 2 percent to $1.36 billion, from a record $1.38 billion last year. Hawthorne segment sales decreased 54 percent to $93 million, compared with $203 million during the same period a year ago, reflecting the continued challenges in the hydroponic industry.<\/p>\n\n\n\n\n\n\n\n
\n January – March 2023<\/strong>\n <\/td>\n<\/tr>\n
\n Net Sales Drivers <\/strong>
\n
\n (1)<\/strong>
\n <\/sup>\n <\/td>\n		\n Volume
& Mix<\/strong>\n <\/td>\n		\n Foreign
Exchange<\/strong>\n <\/td>\n		\n Price<\/strong>\n <\/td>\n\n Other<\/strong>
\n
\n (<\/strong>
\n <\/sup>
\n
\n 2)<\/strong>
\n <\/sup>\n <\/td>\n		\n Net Sales<\/strong>\n <\/td>\n<\/tr>\n
U.S. Consumer<\/td>\n(11)%<\/td>\n0%<\/td>\n9%<\/td>\n0%<\/td>\n(2)%<\/td>\n<\/tr>\n
Hawthorne<\/td>\n(60)%<\/td>\n0%<\/td>\n6%<\/td>\n0%<\/td>\n(54)%<\/td>\n<\/tr>\n
Other<\/td>\n(11)%<\/td>\n(6)%<\/td>\n2%<\/td>\n0%<\/td>\n(15)%<\/td>\n<\/tr>\n
\n Total SMG<\/strong>\n <\/td>\n\n (17<\/strong>
\n )%<\/strong>\n <\/td>\n		\n 0<\/strong>
\n %<\/strong>\n <\/td>\n		\n 8<\/strong>
\n %<\/strong>\n <\/td>\n		\n 0<\/strong>
\n %<\/strong>\n <\/td>\n		\n (9<\/strong>
\n )%<\/strong>\n <\/td>\n<\/tr>\n<\/table>\n

\n (1)<\/sup> Net Sales percentage changes are approximations based on quantitative formulas that are consistently applied
(2)<\/sup> Other includes the impact of acquisitions and divestitures<\/p>\n

GAAP and non-GAAP adjusted gross margin rates for the quarter were 26.9 percent and 34.7 percent, respectively. The GAAP and non-GAAP gross margin rates were 35.1 percent and 35.4 percent, respectively, in the second quarter of last year. Higher commodities and unfavorable conversion and fixed cost leverage, primarily related to volume loss at Hawthorne and lower production volumes in our U.S. consumer business, continued to drive the non-GAAP gross margin rate decline as expected for the quarter. Those pressures were mostly offset by last year\u2019s net price increases and earlier-than-planned Springboard distribution savings from restructuring at Hawthorne. Mix had a negligible impact on year-over-year net sales or gross margin rate.<\/p>\n

Project Springboard has also contributed to a 9 percent reduction in SG&A to $186 million from $205 million a year ago.<\/p>\n

Interest expense increased $20 million year over year to $48 million, driven mainly by higher interest rates. The Company\u2019s average net debt-to-EBITDA ratio at the end of the quarter was 6.0 times versus the covenant maximum of 6.5 times. The maximum remains at 6.5 times next quarter before returning to 6.25 times in the fourth quarter of the fiscal year.<\/p>\n

The Company reported GAAP net income of $109.4 million, or $1.94 per diluted share, compared with prior year earnings of $276.5 million, or $4.94 per diluted share. The current and prior results include after-tax impairment, restructuring, and other non-recurring items of $104.4 million and $5.0 million, respectively. Excluding these charges, non-GAAP adjusted earnings in the quarter were $213.8 million, or $3.78 per diluted share, compared with earnings of $281.5 million, or $5.03 per diluted share, in the second quarter of 2022.<\/p>\n

\n Year-to-date details<\/strong>
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For the first six months of fiscal 2023, the Company reported sales of $2.06 billion, down 8 percent from $2.24 billion a year earlier. U.S. Consumer segment sales increased slightly to $1.73 billion. Sales for the Hawthorne segment decreased 43 percent to $224 million.<\/p>\n\n\n\n\n\n\n\n
\n October 2022 – March 2023<\/strong>\n <\/td>\n<\/tr>\n
\n Net Sales Drivers <\/strong>
\n
\n (1)<\/strong>
\n <\/sup>\n <\/td>\n		\n Volume & Mix<\/strong>\n <\/td>\n\n Foreign Exchange<\/strong>\n <\/td>\n\n Price<\/strong>\n <\/td>\n\n Other<\/strong>
\n
\n (<\/strong>
\n <\/sup>
\n
\n 2)<\/strong>
\n <\/sup>\n <\/td>\n		\n Net Sales<\/strong>\n <\/td>\n<\/tr>\n
U.S. Consumer<\/td>\n(10)%<\/td>\n0%<\/td>\n10%<\/td>\n0%<\/td>\n0%<\/td>\n<\/tr>\n
Hawthorne<\/td>\n(48)%<\/td>\n(1)%<\/td>\n5%<\/td>\n1%<\/td>\n(43)%<\/td>\n<\/tr>\n
Other<\/td>\n(18)%<\/td>\n(6)%<\/td>\n7%<\/td>\n0%<\/td>\n(17)%<\/td>\n<\/tr>\n
\n Total SMG<\/strong>\n <\/td>\n\n (17<\/strong>
\n )%<\/strong>\n <\/td>\n		\n (1<\/strong>
\n )%<\/strong>\n <\/td>\n		\n 9<\/strong>
\n %<\/strong>\n <\/td>\n		\n 1<\/strong>
\n %<\/strong>\n <\/td>\n		\n (8<\/strong>
\n )%<\/strong>\n <\/td>\n<\/tr>\n<\/table>\n

\n (1)<\/sup> Net Sales percentage changes are approximations based on quantitative formulas that are consistently applied
(2)<\/sup> Other includes the impact of acquisitions and divestitures<\/p>\n

The company-wide gross margin rate was 24.7 percent on a GAAP basis and 31.0 percent on a non-GAAP adjusted basis compared with rates of 31.5 percent and 31.7 percent, respectively, a year ago. SG&A decreased 12 percent to $315 million.<\/p>\n

The progress on gross margin rates and SG&A improvements are reflective of the Company\u2019s Project Springboard actions that are now slated to deliver at least $200 million in run-rate savings by fiscal year-end.<\/p>\n

On a company-wide basis, GAAP net income was $44.7 million, or $0.80 per diluted share, compared with $226.4 million, or $4.02 per diluted share, for the first six months of fiscal 2022. Excluding impairment, restructuring, and other non-recurring items, non-GAAP adjusted earnings were $157.4 million, or $2.81 per diluted share, compared with $232.9 million, or $4.14 per diluted share, last year.<\/p>\n

\u201cWe\u2019ve seen more than $500 million in additional commodity costs over the past three years,\u201d Garth said. \u201cWhile some commodity costs are moderating, they are still higher than two years ago. We will not begin to see the benefit of this moderation until fiscal 2024 as we work down higher-priced inventories and return to normal production volumes. I’m proud of the progress our team continues to make in improving gross margin rates through Project Springboard and net pricing actions.\u201d<\/p>\n

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\n Hawthorne Restructuring – Closure of Four Distribution Centers<\/u>
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Hawthorne also announced the sale of its Hurricane branded fans business, which closed on March 30, 2023. This divestiture helps accelerate Hawthorne\u2019s closures of four additional warehouse facilities in Vancouver, WA; Gresham, OR; Phillipsburg, NJ; and San Bernardino, CA. Costs associated with these actions are included in the second quarter restructuring charges.<\/p>\n

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\n Fiscal 2023 Outlook<\/u>
\n <\/strong>
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The Company\u2019s current outlook for fiscal 2023 as compared to fiscal 2022 is as follows:<\/p>\n