Scotts Miracle-Gro Co., Marysville, Ohio, reported a 35 percent increase in revenues for its first quarter ending Dec. 29, 2018, to $298.1 million versus the year-ago $221.5 million. However, first-quarter net losses were up, at $79.7 million ($1.44 per diluted share) from the year-ago loss of $21.2 million ($0.37 per share). The company traditionally reports a loss for the quarter due to the seasonal nature of the lawn and garden business.
“Our operating results are in line with what we expected and, more importantly, we are extremely encouraged with the level of engagement we are seeing from our largest retail partners as we prepare for the 2019 lawn and garden season,” said Jim Hagedorn, Scotts chairman and CEO. “The combination of strong retailer support, game-changing innovation with products like Miracle-Gro Performance Organics and Ortho GroundClear, and increased investment behind our brands, give us a high level of confidence in our outlook for the season.
“The recent performance at Hawthorne is also encouraging as we began to see a return to growth in the U.S. hydroponics business in the second half of the first quarter, a trend that has continued in January,” he added. “The integration of the Sunlight acquisition also remains on track, including the expected cost savings. These facts renew our confidence in our full-year outlook for Hawthorne and our bullish long-term outlook for our role as the leader in this evolving industry.”
Hagedorn told analysts that Scotts stock hit $110 per share about a year-ago, driven in part about excitement over the cannabis market, but ended the calendar year at a multi-year low of $57. He said management reassessed the company’s strategy and came out of that process confident and aligned that the strategy is sound.
“The last 12 months have been tough, that’s for sure. I wish I could have predicted the contraction of the California cannabis market, but no one else saw that coming either. And in the U.S. Consumer segment, the start of the 2018 season was historically bad,” said Hagedorn. “There’s nothing we or our retail partners could have done differently to change that fact. Sometimes things happen. That’s not an excuse, it is reality.” Luckily, he noted that the year ended more or less flat.
“We see 2019 as a bounce-back year and look forward to proving it,” he added.
“Most of the year-over-year pressures we saw in the first quarter were related to the timing of our business and will be offset later in fiscal 2019,” said CFO Randy Coleman “We have good visibility into our cost structure for the year, and the price increases we established in our U.S. Consumer segment to offset our cost pressures began to take effect in the second quarter.
“We remain confident in our outlook for sales, earnings, and cash flow, and realize consistent execution of our business plan is the single most important element of our success this year,” he added.
Hawthorne’s first-quarter net sales climbed 84 percent, to $140.8 million from the year-ago $76.7 million, while profits rose 159 percent, to $4.4 million from $1.7 million.
The U.S. Consumer segment saw a 9 percent uptick in revenues to $136.9 million from the year-ago $125.9 million, while segment losses grew 14 percent, to $43.1 million from the year-ago loss of $37.9 million.
The first-quarter GAAP loss from continuing operations was $1.49 per share, compared with the year-ago $0.35 per share, when the company recognized a one-time net tax benefit of $42 million related to 2018 federal tax reform. The non-GAAP adjusted loss in the first quarter was $1.39 per share, compared with the year-ago $1.08. The year-over-year non-GAAP decline was largely due to operating items expected to reverse later in the year, as well as otherwise positive non-operating items – notably a lower effective tax rate and share count – which have a negative impact in a loss quarter.