Scotts lowers guidance after disappointing spring

Marysville, Ohio — The Scotts Miracle-Gro Company on June 12 said it expects to fall short of its previous guidance of 6 to 8 percent sales growth and adjusted earnings of $2.65 to $2.85 per share for fiscal 2012 due to lower-than-expected sales and an unfavorable product mix. The company said consumer purchases of its products at its largest retail partners in the U.S. are up 3 percent on a year-to-date basis, compared with 8 percent entering May. Scotts said the challenges this year are primarily an outcome of slowing consumer demand following a strong and early start to the lawn care season in the second quarter. The gardening season, which traditionally peaks in mid- to late-May, has not met expectations, the company said. Consumer purchases of Miracle-Gro branded soils and plant food are essentially in line with 2011, and appear to have been negatively impacted by an industry-wide slowdown in the sale of flower and vegetable plants, Scotts said. In addition, the company said poor weather and challenging economic conditions will also cause its European business to fall short of expectations. Gross margin rates are also likely to fall short, due primarily to unfavorable product mix, unplanned distribution costs associated with the strong performance of the controls and mulch businesses, and reduced leverage of fixed costs. “While we remain confident in the long-term growth opportunities in our business, it is clear that near-term category growth has become harder to achieve,” said Jim Hagedorn, chairman and CEO. “Over the balance of the fiscal year we will pressure test our assumptions and make any necessary adjustments as we plan for the 2013 lawn and garden season.” Hagedorn noted some positives for the company as well, including unit growth in consumer purchases of Scotts’ lawn fertilizer products for the first time in several years; growth in its controls business; and 25 percent growth in the company’s mulch business through the first seven months of the year. An updated outlook will be provided when Scotts issues its third-quarter financial results in early August.