The Scotts Miracle-Gro Co., Marysville, Ohio, reported a 10 percent drop in net income for the second quarter ending April 1, citing wet weather and cumbersome new cannabis permitting in California. Net income was $149 million ($2.59 per diluted share) on revenues of $1.01 billion, down from the year-ago $165.2 million ($2.73 per share) and $1.08 billion, respectively. Revenues were off 7 percent. Adjusted EBITDA was off 14 percent, to $272.9 million from $317.1 million.
“The start to this lawn and garden season has been delayed to a greater extent than we have seen in recent memory,” said Jim Hagedorn, chairman and CEO. “Consumer purchases entering May are down double digits from a year ago. However, in the markets like California and Florida, where the weather has cooperated, consumer purchases are in line with last year’s results, and we’ve seen an enthusiastic response to our new products. We’ve begun to see momentum picking up in the Midwest and Northeast in recent weeks as the weather has turned more favorable, making us optimistic that we can quickly make up ground and finish the season as strong as possible.
“The challenges we began to see earlier this year in California continue to affect our Hawthorne business segment at the mid-way point in the year,” he continued. “As we’ve previously stated, we now expect those challenges to last for the balance of the year, and now believe Hawthorne sales will likely be, at best, flat in 2018 on a year-over-year basis, including the impact of acquisitions.”
Second-quarter U.S. Consumer profits were off 9 percent, to $286.2 million on sales of $920.2 million from the year-ago $313.9 million and $974.8 million, respectively. Hawthorne posted a loss of $4.8 million on sales of $41.8 million, down from year-ago profit of $9.6 million and $59.1 million, respectively.
Six-month net income was $127.8 million ($2.20 per share) on net sales of $1.23 billion, down 4 percent from the year-ago $100.3 million ($1.64 per share) and $1.29 billion, respectively. Six-month U.S. Consumer profits were down 10 percent, to $248.3 million on sales of $1.05 billion from the year-ago $275.4 million and $1.1 billion, respectively. Hawthorne was in the loss column at $3 million on sales of $118.5 million, versus the year-ago profit of $16.3 million and $122.8 million, respectively.
Scotts made no changes in guidance, but reminded investors that its planned acquisition of Sunlight Supply Inc. (GM April 20, p. 1) is expected to reduce non-GAAP adjusted earnings by $0.30-$0.40 per share in fiscal 2018. The company expects to adjust full-year guidance after the deal closes, which is expected to be by June 1. With a lot of consumer activity still before it, the company said it is too early to revise expectations. It expects to provide an updated outlook in mid-June.