MARYSVILLE, Ohio, June 08, 2022 (GLOBE NEWSWIRE) — The Scotts Miracle-Gro Company (:SMG), the world’s leading marketer of branded consumer lawn and garden products as well as indoor and hydroponic growing products , said consumer purchases of its core lawn and garden brands surged in May, with unit volume now trending toward the company’s initial assumptions for the season. However, various factors have prompted the Company to revise downwards its revenue and adjusted earnings outlook for fiscal 2022.
Consumer purchases at the company’s largest retail partners hit near-record levels in May, resulting in year-to-date sales around 6% lower in dollars and 9% lower in units compared to a year ago. The year-over-year decline at the end of May was half of what it had been at the start of the month due to strong results in all major markets in the Midwest and Northeast.
“The recent improvement in consumer engagement has point-of-sale units trending toward our initial expectations and we expect further gains over the course of the year,” said Jim Hagedorn, president and chief executive officer. “POS dollars, however, will likely be below our initial assumption of stability from 2021 levels primarily due to above-average declines in lawn fertilizer and grass seed, which are driving higher prices and margins. , but also tend to be more susceptible to poor spring weather conditions.While there is still enough time in the year to see continued improvement in our control and gardening categories, that probably won’t be the case with the most of the products in our lawn care portfolio.
“Additionally, while it is encouraging that consumers have demonstrated that lawn and garden activity remains an important part of their lifestyle, we have not seen the restocking orders we expected from our partners. retailers since mid-May. In fact, retail orders were more than $300 million lower than our forecast for the month in the US consumer segment alone. This surprising trend has put much greater pressure on our fixed cost structure which, together with the commodity cost increases we have experienced since the start of the war in Ukraine, will cause us to fall well below revised financial targets. that we established in March. .”
Adjusted earnings per share are now expected in the range of $4.50 to $5.00. Sales to US consumers are expected to decline 4-6%. Hawthorne sales are now expected to decline 40-45% for the year ending September 30, 2022. By early May, Hawthorne sales had begun to show signs of strengthening, but the company’s momentum slowed again during the month as the expected improvement in outdoor cultivation was slow to materialize.
“The changes we’ve seen since our last public comments in early May are clearly not what we expected,” Hagedorn said. “The revised guidance we provide is our best estimate of the current situation in a fluid and rapidly changing market. As we strive to achieve the best results for fiscal year 2022, we are focused on the future. We We are committed to taking decisive action to improve our margins and cash flow in fiscal year 2023 and return the business to a level of performance that our shareholders have rightfully expected.
The Company also indicated that it is engaged in very productive discussions with its lenders to obtain a temporary increase in the debt ratio authorized under a revised credit facility.
“We have stated for years that our comfort zone for leverage is 3.5x debt to EBITDA and the current facility allows leverage up to 4.5x,” said Cory Miller, executive vice president and chief financial officer. “Given the external factors currently affecting the business, we are looking to adjust our covenants to allow for up to two additional rounds of near-term leverage to maintain the appropriate level of flexibility to navigate current market conditions. Clearly, we are focused on executing aggressive plans to improve cash flow, reduce debt and bring leverage back to our target levels as quickly as possible.”
Over the past month, the company has also taken aggressive steps to reduce general and administrative expenses throughout the year through a series of organizational changes that have created efficiencies at the operational and corporate level. of management.
“The decisive actions we have taken to reduce expenses will result in a 12-13% year-over-year decline in general and administrative expenses for fiscal year 2022,” Miller said. “We expect to incur restructuring charges in the third and fourth fiscal quarters as a result of these actions that we would remove from our adjusted earnings for the year, consistent with our longstanding practices related to these one-time costs. “
The company will provide more commentary tomorrow, June 9, when it participates in the William Blair 42n/a Annual Growth Conference in Chicago. A webcast will be available on http://investor.scotts.com starting at 1:40 p.m. EDT.
About Scotts Miracle-Gro
With sales of approximately $4.9 billion, the company is one of the world’s largest distributors of branded consumer lawn and garden care products. The Company’s brands are among the most recognized in the industry. The Company’s Scotts®, Miracle-Gro® and Ortho® brands are market leaders in their categories. The Company’s wholly-owned subsidiary, The Hawthorne Gardening Company, is a leading supplier of nutrients, lighting and other materials used in the indoor and hydroponic growing segment. Another wholly owned subsidiary, The Hawthorne Collective, was created to invest in emerging areas of the cannabis industry. For more information, visit www.scottsmiraclegro.com.
Caution Regarding Forward-Looking Statements
The statements contained in this press release, other than statements of historical fact, that address activities, events and developments that the Company expects or anticipates will or may occur in the future, including, but not limited to, information regarding future economic and financial performance. the state of the company, the plans and objectives of the company’s management and the company’s assumptions regarding such performance and such plans are “forward-looking statements” within the meaning of the United States federal securities laws which are subject to risks and uncertainties. These forward-looking statements can generally be identified as statements that include expressions such as “guidance”, “outlook”, “projected”, “believe”, “target”, “predict”, “estimate”, “plan”, “strategy “. ,” “may”, “goal”, “expects”, “anticipates”, “intends”, “plans”, “expects”, “likely”, “will”, “should” or d other similar words or expressions. Actual results could differ materially from the forward-looking information contained in this press release due to a variety of factors, including, but not limited to:
- The ongoing COVID-19 pandemic could have a material adverse effect on the Company’s business, results of operations, financial condition and/or cash flows;
- Compliance with environmental and other public health regulations or changes in such regulations or regulatory enforcement priorities could increase the Company’s operating costs or limit the Company’s ability to market all of its products;
- Damage to the reputation of the Company or the reputation of its products or the products it markets on behalf of third parties could have an adverse effect on its business;
- If the Company underestimates or overestimates demand for its products and fails to maintain appropriate inventory levels, its net sales and/or working capital could be adversely affected;
- If the Company is unable to perform its e-commerce activities effectively, its reputation and operating results could be adversely affected;
- Due to the concentration of the Company’s sales to a small number of retail customers, the loss of one or more of its main customers, or a significant reduction in orders from its main customers, could have an adverse impact on results. financials of the Company;
- Climate change and adverse weather conditions could have a negative impact on financial results;
- Some of the Company’s products may be purchased for use in new or emerging industries or sectors and/or be subject to varying, inconsistent and rapidly changing;
- The Company’s operations may be compromised if its computer systems malfunction or if it is subject to a data breach or cyberattack;
- The Company may not be able to adequately protect its intellectual property and other proprietary rights that are important to the Company’s business;
- In the event of termination of the Third Reformulated Marketing Agreement for consumer Roundup products, or if Monsanto’s consumer Roundup business declines significantly, the Company would lose a substantial source of future revenue and overhead absorption;
- Hagedorn Partnership, LP beneficially owns approximately 26% of the company’s common stock and can significantly influence decisions that require shareholder approval;
- Acquisitions, other strategic alliances and investments could cause operating difficulties, dilution and other adverse consequences that could adversely affect the Company’s business and results of operations.
Additional detailed information regarding a number of important factors that could cause actual results to differ materially from the forward-looking information contained in this release is readily available in the company’s quarterly, annual and other reports. The Company disclaims any obligation to update developments in these risk factors or to publicly announce any revisions to any of the forward-looking statements contained in this release, or to make any corrections to reflect future events or developments.
Vice President, Investor Relations