Scotts Miracle-Gro's Cannabis-Focused Subsidiary Reports 28% YoY Drop In Q3 Net Sales, Reaffirms 2024 Outlook

Author: Jelena Martinovic | July 31, 2024 12:27pm

Scotts Miracle-Gro Company (NYSE:SMG), the world's largest marketer of branded consumer lawn and garden as well as a leader in indoor and hydroponic growing products, announced on Wednesday its results for the third quarter ended June 29, 2024.

Cannabis-focused subsidiary Hawthorne Gardening Company's net sales for the quarter decreased 28%, to $67.7 million, compared to $93.4 million last year. The company said the drop was largely due to the previously announced discontinuation of its third-party distributed brands business.

"Hawthorne has generated its first profitable quarter since the third quarter of fiscal 2022, a reflection that the changes we have made are strengthening the business despite continued industry hardships," Chris Hagedorn, division president, said. "We are on track to break-even or better adjusted EBITDA in fiscal 2024 and are positioning Hawthorne for future growth."

Read Also: Scotts Miracle-Gro’s Cannabis-Focused Subsidiary Reports 39% YoY Revenue Drop In Q1

Q3 2024 Financial Highlights

• Total company sales amounted to $1.2 billion, representing an increase of 7% compared to $1.1 billion a year ago.
• U.S. Consumer net sales increased 11% to $1 billion from $0.9 billion in the same period last year.
• GAAP and non-GAAP adjusted gross margin rates were 29.5% and 29.2%, respectively. These compare to 18.4% and 21.3%, respectively, in the prior year.
• Selling, general and administrative expenses increased 15% to $147.9 million during the quarter compared to $128.5 million a year ago.
• Other expenses were $6.9 million in the quarter.
• Non-GAAP adjusted net income, which excludes impairment, restructuring and other non-recurring items, more than doubled to $133.8 million, or $2.31 per diluted share, from $66 million, or $1.17 per diluted share, for the same period last year.

"Consumer engagement with our brands has remained high through fiscal ‘24, and we expect to drive continued participation through the fall with well-timed media and promotional plans in conjunction with our retail partners," Matt Garth, chief financial and administrative officer, said.

Fiscal 2024 Outlook

The Scotts Miracle-Gro Company reaffirmed the non-GAAP fiscal 2024 guidance issued in June with the exception of Hawthorne net sales.

That segment is now expected to end the fiscal year 35 to 40% lower than the prior year with progress exiting lower margin distributed brands and a projected decline in its professional horticulture lighting business.

The segment still expects to break even or better non-GAAP adjusted EBITDA for the full year in line with previous guidance.

SMG Price Action

The Scotts Miracle-Gro Company's shares traded 5.51% higher at $74.11 per share at the time of writing on Wednesday morning.

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Posted In: SMG