Up against bad weather, Scotts stumbles in Q3
The challenges from unfriendly weather hit Scotts Miracle-Gro hard in the quarter ended July 2, as sales declined 10% to $1.06 billion.
The decline was driven primarily by poor weather across most of the United States throughout the duration of the lawn and garden season, as well as a more competitive promotional landscape and changes in certain retailer strategies within the mass merchandise channel, the Marysville, Ohio-based company said.
"Through mid-March, consumer purchases of our products in the U.S. were up 13%t, but then the situation changed dramatically," said Jim Hagedorn, chairman and CEO. "The challenges we saw from weather this year are unparalleled during my life-long tenure in this industry. The fact that consumer purchases have been impacted more than we expected is also negatively affecting both sales and gross margin rate."
Net income declined 37% to $11.6 million.
The company said it now expects its adjusted earnings for the year to be in a range of $2.95 to $3.05 per share, compared with the analyst target of $3.19.
"While I am disappointed with the results we are announcing today, I remain confident in our category, our brands, our strategy and our team. That continued confidence in our long-term strategy is reflected in the decision by our board of directors to increase our dividend by 20%. We remain committed to a strategy of using our financial flexibility to drive long-term growth, while also returning cash to shareholders."
One bright spot was Scotts LawnService, which saw an increase in revenue of 1% to $82.4 million.
"We are extremely pleased with the progress of Scotts LawnService, and we continue to see it as an important element of our future success," Hagedorn said. "With the improvements to the business model, we believe SLS can continue to drive growth on both the top and bottom lines."