Scotts Miracle-Gro hopes to cut loss in 4Q

Marysville, Ohio — The Scotts Miracle-Gro Co. said Aug. 10 that it expects to have an adjusted loss per share close to $0.60 for the fourth quarter ending Sept. 30, 2012. This compares to a year-ago net loss of $53.4 million ($0.86 per diluted share) on sales of $417.2 million. For the year, Scotts expects an adjusted EPS in the plus column at $2.00. In fiscal 2011, Scotts had income of $167.9 million ($2.54 per share) on sales of $2.83 billion. Scotts told analysts that commodity costs were a negative for the company so far this year, and that the company has been busy the past few weeks locking those in for 2013, particularly for urea and diesel. Scotts said it is moderating its expectations in 2013 due to the general economy and is planning for flat volumes and higher prices. The company did not increase prices in 2012 but plans to do so in 2013, probably in the low single digits. Scotts said that while it gained market share in most categories in 2012, including against private labels and major competitors, the company plans to cut costs in 2013, including advertising. “We concluded that the cost of chasing that growth is just too high right now and is the wrong solution for shareholders in the near term,” Chairman and CEO James Hagedorn told analysts. He said second-half Miracle Gro sales were hit pretty hard, and acknowledged that in a weak economy Scotts products are discretionary. “What we think the data is telling us is that if people are stressed, they’ll just step out of the market for a year and they won’t do anything.” Heat was cited as another factor impacting lawn and garden consumers. He said the good news is the company did not see a shift to private label. Hagedorn did say the company was able to change the trajectory for lawn fertilizer with it remaining flat year-over-year, as opposed to the million-unit losses per year it had been dealing with. He believes consumers will accept a price increase, adding that competitors increased prices this year, while Scotts did not. He expects Scotts’ pricing increase may be slightly above that of competitors. Hagedorn said Scotts is looking at money losing and marginal items to cut from its portfolio.