The Scotts Miracle-Gro 2025 Q2 Earnings Revenue Declines 6.8%, Net Income Rises 38%

The scotts miracle-gro (SMG) reported its fiscal 2025 Q2 earnings on May 7th, 2025. The results revealed a mixed performance as the company’s revenue declined by 6.8% compared to the same quarter last year, coming in at $1.42 billion, down from $1.53 billion. However, the company witnessed a significant rise in net income, which increased by 38.1% to $217.50 million, surpassing expectations. The earnings per share (EPS) also saw a notable increase of 36.5%, rising from $2.77 in 2024 Q2 to $3.78 in 2025 Q2. The company reaffirmed its full-year guidance, maintaining its outlook for adjusted EBITDA, U.S. Consumer segment net sales, and other financial targets.

Revenue

The total revenue for the scotts miracle-gro in fiscal 2025 Q2 reached $1.42 billion, marking a 6.8% decrease from the previous year. The U.S. Consumer segment generated $1.31 billion, while the Hawthorne segment contributed $32.70 million. The 'Other' segment added $76.80 million, totaling the consolidated revenue to $1.42 billion.

Earnings/Net Income

The Scotts Miracle-Gro's earnings per share (EPS) increased by 36.5%, reaching $3.78 in 2025 Q2, compared to $2.77 in 2024 Q2. This indicates a strong EPS performance, reflecting the company's ongoing earnings growth. Net income rose to $217.50 million in 2025 Q2, an increase of 38.1% from $157.50 million in the same quarter of the previous year.

Price Action

The stock price of The Scotts Miracle-Gro edged down 1.61% during the latest trading day, climbed 6.89% during the most recent full trading week, and increased 4.75% month-to-date.

Post-Earnings Price Action Review

Over the past five years, investing in Scotts Miracle-Gro shares following a quarter of revenue increase and holding them for 30 days has resulted in underperformance. The strategy yielded a -4.00% return, significantly lagging the benchmark return of 84.08%. The excess return was -88.08%, with a CAGR of -0.82%, indicating considerable losses. Additionally, the strategy experienced a high maximum drawdown of -16.49% and a low Sharpe ratio of -0.10, reflecting substantial risk and negative returns. These metrics highlight the challenges faced by investors using this approach, underscoring the importance of reassessing investment strategies.

CEO Commentary

James Hagedorn, Chairman and CEO of Scotts Miracle-Gro, expressed optimism about the company's performance despite the challenging macro environment. He reaffirmed the company's full-year guidance and highlighted strong growth drivers, including a 12.1% increase in consumer takeaway and effective promotional strategies that are enhancing market share. Hagedorn emphasized the company's resilience in a recession-resistant industry and ongoing efforts to improve operational efficiency. He also mentioned the importance of adapting marketing strategies to meet consumer needs, particularly through joint promotions with retailers focused on multi-step applications.

Guidance

The Scotts Miracle-Gro Company has reaffirmed its full-year guidance for adjusted EBITDA, targeting between $570 million and $590 million. The company anticipates low single-digit growth in U.S. Consumer segment net sales and has maintained its adjusted gross margin and free cash flow targets. CEO James Hagedorn expressed confidence in achieving these goals, stating, "We believe we can get to a gross margin north of 35%." The company remains focused on reducing leverage to around 3.5 times by fiscal year-end 2027.

Additional News

Recently, The Scotts Miracle-Gro Company made significant strides in restructuring its cannabis-related operations. The company announced the transfer of its wholly-owned subsidiary, The Hawthorne Collective, to an independent strategic partner. This move is part of Scotts Miracle-Gro's strategy to separate its cannabis holdings from its core lawn and garden business, aiming to reduce the volatility associated with the cannabis sector. Additionally, James Hagedorn, the company's CEO, reiterated the focus on enhancing shareholder value by reallocating resources to its consumer business. The transfer agreement includes an interest-bearing promissory note, with the option to reacquire The Hawthorne Collective or its assets if favorable federal cannabis reforms occur.

Ask Aime: What impact will Q2 earnings have on Scotts Miracle-Gro's stock price?