Here is why The Scotts Miracle-Gro Company dipped 15%

The Scotts Miracle-Gro Company (NYSE: SMG) dropped 15% after the leader in the marketing of branded consumer garden, and lawn products stated that consumer sales of its lead garden and lawn brands surged in May as unit volume trends towards the firm’s original guidance for the season. Despite the increase in purchases, the company said that various factors necessitated the slashing of its sales and earnings outlook for 2022.

Customer purchases in retail partners surged in May

In May, customer purchases at The Scotts Miracle-Gro’s leading retail partners surged to near-record highs, leading in year-to-date POS, which is roughly 6% less in dollars and 9% lower in volume than the previous year. Because of good results across all major Northeast and Midwest markets, the YoY decline at the end of last month was 50 percent of what it was entering in May.

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CEO and chairman Jim Hagedorn said:

The recent improvement in consumer engagement has POS units trending toward our initial expectations and we expect further gains as the year continues. POS dollars, however, will likely fall short of our initial assumption of flat from 2021 levels due primarily to above average declines in lawn fertilizer and grass seed, which command higher prices and margins but also tend to be more susceptible to poor spring weather.

While there is still an opportunity for the company’s controls and gardening classes to develop more this year, this is unlikely to be the case for the majority of the lawn care goods.

Adjusted earnings to be between $4.5-$5 per share

Hagedorn added:

Also, while it is encouraging that consumers have demonstrated lawn and garden activity remains an important part of their lifestyle, we did not see the replenishment orders we expected from our retailer partners since mid-May. In fact, retailer orders were more than $300 million below our plans for the month in the U.S. Consumer segment alone.

The company now expects adjusted earnings per share to be between $4.5 and $5, with US consumer sales expected to drop 4% -6%. Hawthorne sales will drop 40% to 45% for the fiscal year ending September 30; considering heading to May, Hawthorne sales started showing signs of strengthening, but business momentum slowed again, with expected outdoor cultivation improvement being slow to materialize.