Scotts slips in the third quarter

The Scotts Miracle-Gro Company slipped in the third quarter, having spent the later half recovering from bad weather impact in the beginning.

Net sales for the quarter ended July 2 were $994.1 million, down 11% compared with $1.11 billion for the same period a year ago.

Scotts attributed $90 million of the decline to a six-day shift in the company’s fiscal calendar. Everything else was the result of lower shipments in both the U.S. and Europe due to weather in April and early May that put a drag on consumer lawn and garden activity.

Net income came in at $212.7 million, up from $133.0 million in the year-ago period.

“The first half of the quarter was extremely difficult due to weather, but we’ve made a solid recovery in nearly all parts of the U.S. since mid-May,” said Jim Hagedorn, chairman and chief executive officer. “Consumer purchases were up 14% entering the quarter, but had declined 2% on a year-to-date basis by the time we reached the third week of May. Due to a 13% increase in POS during June, consumer purchases were up 2% entering the fourth quarter and positive in all regions but the Southwest.

Scotts also completed its contribution of the Scotts LawnService business into a joint venture with TruGreen, called Project Focus. With the integration coming along, the company added that expected earnings dilution from the transaction is likely to be slightly higher than expected in fiscal 2016, as the closing of the joint venture was delayed by about two months.

“I remain pleased with the fundamentals of our business and our execution around Project Focus," added Hagedorn. "We have recently completed a second significant acquisition in the hydroponics space and, in recent days, have signed a definitive agreement for a third transaction. These deals will give us a strong leadership position in the fast growing hydroponics industry and total annual sales approaching $250 million for The Hawthorne Gardening Company. As we had promised, we are now beginning the transition away from acquisitions and will begin a more aggressive return of cash to shareholders, through both an increased dividend and share repurchase activity.”

Finally, the company revised its full-year guidance down to sales growth of roughly 2%, much of which it says will be driven by acquisitions.