Marysville, Ohio-The Scotts Miracle-Gro Co. said July 8 that it will cease operating its Smith & Hawken business by the end of the calendar year and has hired a third-party firm to manage the closure process. “We would have preferred to sell the Smith & Hawken business in order to protect jobs and keep the retail franchise intact. However, after discussions with several potential investors over the past 12 months, it became obvious that shutting down the business was the best option available,” said Jim Hagedorn, chairman and CEO of Scotts Miracle-Gro. “It is with regret for the associates of Smith & Hawken and our many loyal customers that we have reached this conclusion. I want to acknowledge our associates who have been intensely loyal and worked tirelessly to make Smith & Hawken a viable enterprise. Unfortunately, the combination of a weak economy and the lack of scale proved too great to overcome. While this is a sad outcome for Smith & Hawken, it is in the best long-term interest of ScottsMiracle-Gro and our other stakeholders. Our core consumer lawn and garden business continues to enjoy outstanding results, and we continue to expand our operations and add jobs to our payroll. By eliminating the losses from Smith & Hawken, we can invest even further in driving profitable growth and enhancing shareholder value.” After-tax charges associated with the closure are expected to be approximately $25 million and are primarily related to the termination of lease obligations and severance costs. Most of the charges will be incurred during the fourth quarter of fiscal 2009 and the first quarter of fiscal 2010. The company will treat these charges as a one-time adjustment to earnings and will place Smith & Hawken into discontinued operations near the conclusion of the store closing process. The company currently expects the cash impact of the transaction to be relatively neutral as a result of proceeds from inventory liquidation and anticipated tax benefits. The impact of shutting down the Smith & Hawken business is expected to result in a benefit of about $0.15 in adjusted earnings per share beginning in fiscal 2010. The closure process, which is being managed by third-party consultants, begins with storewide sales on July 9. Store closures are expected to be completed by the end of the year. Orders via Smith & Hawken’s Web site, catalog, and call center will be discontinued effective July 9, and customers will be directed to purchase products at the stores. Smith & Hawken gift cards will be honored at the stores during the closure process. Smith & Hawken has 56 stores in 22 states and Washington, D.C. Scotts bought Smith & Hawken in 2004 for $72 million, including the assumption of $14 million in debt (GM Aug. 16, 2004).
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