Scotts Miracle-Gro Co. reported net income of $175.9 million ($2.59 per diluted share) on sales of $1.24 billion for the third quarter ending July 3, 2010, compared to the year-ago net income of $147.8 million ($2.24 per diluted share) on sales of $1.23 billion.
Nine-month net income was $236.7 million ($3.51 per share) on sales of $2.66 billion, versus the year-ago $168.2 million ($2.55 per share) on sales of $2.46 billion.
Scotts said it has been a strong year, though it has not been the best year for weather. It pointed to bad weather in January-March in some areas and then euphoria in April, when it saw a huge increase in sales. The company said its nimbleness and region-by-region presence allowed it to go after the business when it was available. “It is not a business for folks who don’t like roller coaster rides,” said Chairman and CEO Jim Hagedorn, or “for the faint of heart.”
Scotts told analysts that it is exploring strategic alternatives for its Global Professional business unit. “I think it is a good business,” said Hagedorn. “I’m not sure that we are the best owner necessarily of that business.” He said the company is carefully examining whether the unit should remain in the Scotts portfolio.
Scotts said it would continue to focus on its Global Consumer business. “Our consumer business is our heart and soul. That is who we are,” said Hagedorn.
Third-quarter Global Consumer income was $292.7 million on sales of $1.085 billion, up from the year-ago income of $265.2 million on sales of $1.083 billion. Nine-month net income was $510.2 million on sales of $2.31 billion, up from the year-ago income of $429.2 million on sales of $2.11 billion.
Global Professional income for the third quarter was $6.9 million on sales of $71.9 million, versus the year-ago income of $5.2 million on sales of $69.5 million. Income was down for the first nine months, to $15.3 million from the year-ago $26.8 million, while sales were up 4 percent, to $205.3 million from $196.5 million.
Scotts LawnService 3Q income was $22.8 million on sales of $81.3 million, up from the year-ago income of $21.6 million on sales of $78.9 million. Nine-month income was $1.5 million on sales of $144.9 million, up from the year-ago loss of $2.3 million on sales of $150.5 million.
Scotts said it is seeing higher prices for next year and it expects to pass them on to consumers – at least modestly. “We know we have some price increases coming our way and for sure we are not going to let that affect our margin,” said Hagedorn. He said Scotts is looking at modest price increases, in the low single-digits in selected categories. “I don’t think we’re afraid to be sort of alone on pricing, especially where we see cost increases coming down the road. On the other hand, if the consumer is not willing to pay that price, and we see differentials get to a point where we’re not comfortable, we’ll make adjustments in season if we have to.” He noted that the company is operating in a period of historic consumer weakness, which adds more pressure not to make a mistake.
That said, Scotts said sales are up 6 percent year-to-date in four states with some of the worst economic pain – Florida, California, Nevada, and Pennsylvania ?Çô and they were up 5 percent in another – Michigan.
Scotts also confirmed that Walmart is planning to pick another supplier for some or all of its private label fertilizer business instead of Scotts. Scotts picked up private label business when Spectrum Brands Inc. went out of business (GM June 29, 2009). However, Scotts assured analysts it would still do an “awesome” quantity of branded business with Walmart. “Walmart is committed to our branded business and we have excellent programs in the queue for next year in regard to our branded fertilizer program,” said Mark Baker, Scotts president and chief operating officer. “So I feel very good about that. I do like the private business, largely because we have one truck coming in, we can deliver everything together, it’s more efficient for them …. But the retailers can make the choices they want, and there’s a price below which we’re not going to do it.”
In other news, Scotts said that by the end of summer it will open new regional offices in Chicago and New York. Overall sales growth is expected to be 5-7 percent this fiscal year, which is down from earlier estimates of 7-8 percent.
Scotts also announced last week that its board authorized it to repurchase up to $500 million worth of common shares over the next four years. The board also voted to increase the quarterly dividend paid to shareholders to $.25 per share, double the current level.