Sales up, earnings down for Scotts Miracle-Gro

The Scotts Miracle-Gro Company reported first quarter 2018 sales of $221.5 million, up 7% from first quarter 2017 sales of $207.4 million a year earlier.

Following the report, Wall Street hammered the company’s stock, which dropped 14.2% on Tuesday. 

Sales for the Hawthorne segment increased 20% to $76.7 million while U.S. Consumer segment sales were flat at $125.9 million, the Marysville, Ohio-based company said. The Hawthorne Gardening Company focuses on hydroponics, cannabis plants and urban gardening. 

The lawn and garden products supplier also reported a loss from continuing operations of $20 million for the first quarter. Scotts Miracle-Gro noted that “due to the seasonal nature of the lawn and garden category,” the company reports a loss each year during its first quarter.

Scotts reported a first quarter 2017 loss from continuing operations of $58.1 million. Overall, the company posted a net loss of $21.2 million for the quarter compared to a net loss of $64.9 million during the first quarter 2017.

“As we prepare for the start of the lawn and garden season, our core business is on pace with our internal expectations and we continue to expect solid consumer and retailer engagement once the weather breaks,” Jim Hagedorn, chairman and CEO of Scotts Miracle-Gro, said in a prepared statement. “In our Hawthorne segment, growth was driven by acquisitions. Excluding acquisitions, sales declined roughly $12 million from the prior year, which we attribute to the slower-than-expected pace of regulatory changes in California.”

Hagedorn said that while the company views the recent slow-down within Hawthorne as temporary, it has continued into the second quarter. “We now expect full-year organic sales growth at Hawthorne will be flat assuming a return to normal market conditions in the second half of the year. Our long-term prospects for this business remain unchanged and we continue to see Hawthorne having strong long-term growth,”

Regarding the passing of the Tax Act, Scotts Miracle-Gro was complimentary and noted that employees will reap the benefits.

 “We appreciate both President Trump and Congress showing the courage to address the uncompetitive nature of the corporate tax structure in the U.S.,” Hagedorn said. “While our shareholders will benefit from this reduction, our associates will as well.”

Hagedorn said that the company expects the first 20% of tax savings will result in higher wages for hourly associates and improvements in the Scott’s benefits programs.