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Jul 01, 2023
Scotts Q3 2023 Earnings Report
ScottsMiracle-Gro's financial performance declined due to Hawthorne's decrease, but U.S. Consumer sales increased slightly and POS dollars went up, with Project Springboard savings exceeding expectations. The company updated its full-year sales and earnings outlook and amended its credit agreement.
Key Takeaways
ScottsMiracle-Gro's third-quarter net sales decreased by 6% due to a 40% decline in the Hawthorne segment, although U.S. Consumer net sales increased by 1%. The company is focusing on expense reduction, cash flow improvement, and debt paydown, with expectations of achieving $1 billion in cash flow by the end of fiscal '24. Full-year sales and Adjusted EBITDA are expected to decline.
Company-wide third quarter net sales decreased 6% due to Hawthorne decline of 40%; U.S. Consumer net sales increased 1% over prior year
Consumer POS dollars up 8% in the third quarter and over 5% year to date
Year-to-date cash flow improved over $700 million
Total Project Springboard savings to exceed $300 million
Revenue by Segment
Forward Guidance
The Company now expects total net sales to decline approximately 10 to 11 percent mainly driven by a net sales decline in the U.S. Consumer segment of 2 to 4 percent and a net sales decline of 30 to 35 percent in the Hawthorne segment. Additionally, operating income is expected to range from 7 to 7.5 percent of sales for the year. Including these revisions, full-year Adjusted EBITDA is expected below prior year by about 25 percent, and the resulting tax rate will move higher to 28 to 29 percent for the year. Expectations for interest expense and strong free cash flow generation remain unchanged.
Positive Outlook
- Expectations for interest expense remain unchanged.
- Expectations for strong free cash flow generation remain unchanged.
Challenges Ahead
- Total net sales are expected to decline approximately 10 to 11 percent.
- Net sales decline in the U.S. Consumer segment of 2 to 4 percent is expected.
- Net sales decline of 30 to 35 percent in the Hawthorne segment is expected.
- Operating income is expected to range from 7 to 7.5 percent of sales for the year.
- Full-year Adjusted EBITDA is expected below prior year by about 25 percent.
Revenue & Expenses
Visualization of income flow from segment revenue to net income
Historical Earnings Impact
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Avg. Return Before/After Earnings
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