Scotts Miracle-Gro says cannabis slowdown and supply chain issues have impacted sales
Scotts Miracle-Gro Co. said Tuesday it maintains its full-year adjusted earnings outlook, although the company expects Hawthorne sales to decline 40% in the fiscal first quarter due to ‘a slowdown in the cannabis market and supply chain issues. The first fiscal quarter ended on January 1.
Hawthorne is a wholly owned subsidiary of Scotts Miracle-Gro SMG,
specializing in articles for indoor growing and hydroponics.
Adjusted earnings for the year are expected to be between $ 8.50 and $ 8.90.
The FactSet consensus is for annual revenue of $ 4.9 billion and EPS of $ 8.58.
See: Cannabis company investors burned by market losses in 2021 even as pot trade grows
CFO Cory Miller said in a statement that the company expects supply chain issues to be resolved by the end of January and pre-orders for the second and third quarters are healthy.
“However, the decline we saw in the first quarter, compared to 71% growth compared to a year ago, is larger than we anticipated. Based on our current view of the market, we are lowering our annual sales forecast for Hawthorne to a range of 0 to minus 10% year over year, ”he said.
Scotts Miracle-Gro also announced two acquisitions on Tuesday: Luxx Lighting for $ 215 million and True Liberty Bags, a liner and storage company for the hydroponics market, for $ 10 million.
Scotts says Luxx will add $ 100 million in sales and $ 20 million in operating revenue per year to Hawthorne’s business. Luxx is expected to generate $ 75 million in sales for the remainder of fiscal 2022 and is expected to be earnings neutral for the first year. Hawthorne’s full-year sales forecast includes the inclusion of the Luxx acquisition and “assumes a return to growth in the second half of the year,” Miller said.
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Raymond James analysts followed by reiterating their strong buy rating on Scotts shares, but lowering the target price by $ 5 to $ 195.
“Our strong buy rating on Scotts Miracle-Gro stocks reflects both our long-term optimism about the company’s Hawthorne hydroponic segment, as well as our view that much of the recent expansion in the market is addressable. for his United States, “Raymond James wrote in a note. “The consumer segment during the COVID pandemic is expected to prove sustainable. “
Scotts announced in August 2021 that it had acquired HydroLogic Purification Systems in a $ 65 million deal and Rhizoflora, a nutrients company that was added to Hawthorne’s portfolio.
Scotts Miracle-Gro is scheduled to hold its annual meeting on January 24 and report first quarter results on February 1, according to a FactSet schedule.
Scotts Miracle-Gro stock fell 2.1% in trading on Tuesday and has fallen 19.7% in the past year.
The S&P 500 SPX index,
gained 29.4% over the period.