While most public farm crop fertilizer companies are having a tougher year in 2009 than in 2008, Scotts Miracle-Gro Co., the major lawn and garden fertilizer company, is the opposite. In 2008 Scotts, rocked by high input costs as well as recall and registration problems, was in the doldrums. This year, a buoyant lawn and garden market and lower input costs have helped turn Scotts around.
Scotts recently updated its financial outlook for fiscal 2009 based on strong continued demand for its products in the U.S. The company said it expects adjusted earnings for fiscal 2009 to be in the range of $2.35 to $2.45 per share. It also updated its fiscal 2009 outlook for free cash flow to a minimum of $180 million. The company’s previous guidance assumed adjusted earnings in the range of $2.10 to $2.30 per share, and free cash flow between $150 million and $170 million.
Consumer purchases of the company’s products in the U.S., as measured by point-of-sale data from its largest retail partners, were up 17 percent on a fiscal year-to-date basis through the end of May, with particular strength in gardening-related categories. Consumer purchases of growing media products improved 23 percent through May compared with the same period last year. Consumer purchases of lawn fertilizer increased 19 percent. Similar trends remained in place through the first half of June.
“The high level of consumer engagement we’ve seen this season is a testament to three things: the coordinated approach to marketing and promotion between us and our retail partners; our increased advertising spend throughout the season and improved creative direction; and a 30 percent increase in the number of hours our sales force has spent in retail stores,” said Jim Hagedorn, chairman and CEO. “These factors have helped to drive strong momentum beyond the peak of the season, and we’re hopeful it will continue through the balance of the fiscal year.”
In addition to the strength of the Global Consumer segment, Scotts LawnService is now expected to report strong earnings improvement despite lower year-over-year revenue and customer count.
Company-wide sales are expected to increase 7 to 8 percent, excluding the impact of recall and registration matters and foreign currency. On a reported basis, that translates to an expected improvement of 4 to 5 percent.
Scotts recently told analysts that in May basically all of its raw material needs were locked in, with no more volatility expected for the rest of the year. Scotts put current urea costs at about $275/st, versus the year-ago $800/st. In addition, it noted that this spring it was able to pass on 30 percent increases in fertilizer on to consumers.
As for the good spring L&G season, the company said that on some days it was shipping 3,000 truckloads per day to the big three retailers – Walmart, Home Depot, and Lowe’s.
Scotts and its smaller competitor, Central Garden & Pet, both benefited by gaining more private label business after competitor Spectrum Brand Inc. left the L&G and growing media markets (GM Nov. 24, 2008) and went into bankruptcy earlier this year (GM Feb. 23, 2009).