The Scotts Miracle-Gro Company ( SMG Quick Quote SMG - Free Report) reported loss from continuing operations of $443.9 million or $8.01 per share in third-quarter fiscal 2022 (ended Jul 2, 2022) compared with a profit of $229.8 million or $4.00 per share in the year-ago quarter. Barring one-time items, the adjusted earnings were $1.98 per share, down from $3.98 a year ago. The figure topped the Zacks Consensus Estimate of $1.70. Net sales fell around 26% year over year to $1,186.1 million and missed the consensus mark of $1,199.8 million. The company witnessed lower sales across its major segments in the quarter. It saw lower-than-expected sales in the U.S. Consumer segment and sustained pressure on sales in the Hawthorne unit due to oversupply issues in the cannabis industry. Company-wide gross margin rate (as adjusted) was 25.5% compared with 30.8% in the year-ago quarter. The decline in gross margin is attributable to unfavorable fixed cost leverage related to volume, increased commodity costs and unfavorable distribution costs. These were partly offset by price increases and favorable segment mix.
In the third quarter, net sales in the U.S. Consumer division were down 14% year over year to $904.5 million. The segment delivered a profit of $181.1 million, down 32% year over year.
Net sales in the Hawthorne segment tumbled 63% year over year to $154.5 million in the reported quarter. The segment reported a profit of $4.1 million, down 92% year over year. Net sales in the Other segment fell 10% year over year to $127.1 million. The segment reported a profit of $10.9 million, down 59% year over year. Balance Sheet
At the end of the quarter, the company had cash and cash equivalents of $27.8 million, down around 52% year over year. Long-term debt was $3,155.6 million, up around 48% year over year.
The company anticipates a similar or greater decline in sales in the U.S. Consumer division in the fiscal fourth quarter. For the full year, it now expects sales to decline 8-9%. It also expects full-year adjusted earnings per share to be $4.00-$4.20.
Scotts Miracle-Gro also announced “Project Springboard”, aimed at boosting margins, improving cash flow and strengthening the balance sheet to provide a strong foundation for sustainable shareholder value creation. Price Performance
Shares of Scotts Miracle-Gro have declined 49.2% in the past year against a 48.7% rise of the
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Scotts Miracle-Gro currently carries a Zacks Rank #5 (Strong Sell).
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