Scotts Miracle-Gro stock plunges 15% on earnings despite revenue increase

Scotts Miracle-Gro Company (NYSE: SMG) announced its results for the full year and fourth quarter ended September 30, 2024. Sales increased and beat analysts’ estimates, but huge losses continue to bedevil the company. Scott’s stock was plunging over 15% to lately sell near $78.

Fourth Quarter

Scotts reported that its net sales increased by 11% to $414.7 million over last year’s $374.5 million. U.S. consumer net sales increased 54% to $309.7 million from $201.0 million in the same period last year. Revenue beat the Yahoo Finance average analyst estimate for revenue of $399 million. The company attributed the gains to a normalization of shipment timing versus the same period last year.

The hydroponic side of the business associated with cannabis Hawthorne saw its segment sales decrease 46% to $80.5 million versus last year’s $149.7 million in the fourth quarter. The company said the decline was due to Hawthorne’s exit from distribution of third-party brands and a decline in sales from its professional horticultural lighting business.

Fourth quarter losses

For the fourth quarter, the company reported a GAAP net loss of $244 million, or $4.29 per share, which sounds substantial but compared to last year’s fourth-quarter loss of $468.4 million, it was an improvement.

Non-GAAP adjusted net loss for the quarter, which excludes impairment, restructuring and other non-recurring items, was a loss of $131.5 million, or $2.31 per share, also lower compared to a loss of $155.4 million, or $2.77 per share, for the same period last year. This missed the Yahoo Finance average analyst estimate for a loss per share of ($1.97).

Full Year

For the fiscal year, Scotts net sales were roughly flat compared to the prior year at $3.6 billion. U.S. Consumer segment sales increased 6% to $3.0 billion, driven by incremental shelf space, new listings and promotions mainly in the gardens and controls businesses. Sales for the Hawthorne segment decreased 37% to $294.7 million, again driven by the discontinuation of its third-party distribution business.

“Our performance in fiscal 2024 serves as a testament to our financial turnaround,” said Jim Hagedorn, chairman, CEO and president of ScottsMiracle-Gro. “We’ve established a foundation for our three-year growth plan that is grounded in my mid-term priorities, and we expect to make substantial progress against these priorities in 2025.”

The GAAP net loss for the full year was $34.9 million, or $0.61 per share, compared with a loss of $380.1 million, or $6.79 per share, in the prior year. Non-GAAP adjusted earnings, which exclude impairment, restructuring and other non-recurring items, were $132.0 million, or $2.29 per diluted share, compared with $68.1 million, or $1.21 per diluted share, last year.

“Fiscal 2024 was a strong transition year for the Company in which we continued to transform the business while achieving meaningful top- and bottom-line growth in our core business,” said Matt Garth, chief financial officer and chief administrative officer. “We made strategic investments in marketing and innovation to drive sales and support the long-term health of our brands powered by additional efficiency gains across our organization.

“These investments, along with the difficult choices we made to discontinue underperforming business lines in fiscal 2024, position us to make positive strides towards our three-year financial targets shared at our July investor day. In fiscal 2025, we will achieve additional gross margin recovery, make incremental investments in our brands of at least $40 million and deliver meaningful adjusted EBITDA growth.”