MARYSVILLE, Ohio - The Scotts Miracle-Gro Company (NYSE: NYSE:SMG), a prominent player in the lawn and garden care market, announced its strategic plans during an Investor Day event held at its headquarters. The company outlined its three-year objectives, aiming for an average annual growth rate of 3 percent and a return to historic adjusted gross margin rates above 30 percent.
The management team introduced at the event will focus on strategic and operational priorities for both the U.S. Consumer and Hawthorne segments. In the U.S. Consumer division, growth is sought through new retail partnerships and outreach to Hispanic consumers, as well as through technology investments expected to yield $150 million in supply chain cost savings over three years.
ScottsMiracle-Gro also plans to transform its Hawthorne subsidiary from a distributor to a branded solution provider, emphasizing its proprietary brands to drive higher-margin sales. This shift is anticipated to contribute significantly to the company's earnings starting in fiscal 2025.
The company has set mid-term targets for fiscal years 2025 through 2027, which include maintaining selling, general and administrative expenses (SG&A) between 15 to 16 percent of net sales while reinvesting savings into marketing and innovation. These measures are expected to result in a non-GAAP adjusted operating margin exceeding 15 percent and adjusted EBITDA above $600 million.
Despite challenging weather and economic conditions, ScottsMiracle-Gro is reaffirming its fiscal year 2024 guidance, buoyed by a 10 percent year-over-year point of sale (POS) unit growth through June. The company remains focused on reducing debt, aiming to bring leverage below four times non-GAAP adjusted EBITDA by the end of fiscal 2026, while continuing to pay quarterly dividends to shareholders.
The company's longer-term strategy includes a balanced capital allocation, potentially returning to accretive mergers and acquisitions and further shareholder returns. ScottsMiracle-Gro expects to generate more than $300 million in annualized free cash flow after capital expenditures, which will be primarily directed toward further debt reduction.
The company will share its fiscal third quarter financial results on July 31, 2024, with registration details for the quarterly webcast to be announced the week prior.
This news article is based on a press release statement from The Scotts Miracle-Gro Company. The company, with approximately $3.6 billion in sales, is recognized for its leading brands in the industry, including Scotts®, Miracle-Gro®, and Ortho®, as well as its wholly-owned subsidiary, The Hawthorne Gardening Company. For further information, the company directs interested parties to its investor website.
In other recent news, Scotts Miracle-Gro Company has shown significant support for the merger between RIV Capital and Cansortium (OTC:CNTMF), two notable entities in the cannabis industry.
The merger aims to create a robust platform for expansion in states with substantial population sizes, such as Florida, Texas, Pennsylvania, and Alabama. ScottsMiracle-Gro, through its subsidiary The Hawthorne Collective, previously invested $175 million in RIV Capital, and upon merger approval, plans to exchange these notes for non-voting exchangeable shares in Cansortium.
Scotts Miracle-Gro has also reported steady progress in its fiscal second quarter of 2024, with an optimistic outlook on its consumer business and strategic investments in the cannabis sector. The company is on track to meet its '24 guidance, including high single-digit growth in the consumer business. It also reported a 5% reduction in total debt, with balances down to $2.8 billion from $3.6 billion a year earlier.
The company anticipates achieving $575 million in adjusted EBITDA and $1 billion in free cash flow over two years. Despite a projected decline in Hawthorne's net sales, the company maintains a positive outlook. Lastly, Scotts Miracle-Gro is exploring ongoing strategic options for Hawthorne and is comfortable with convertible debt or exchangeable shares for investments in cannabis ventures.
InvestingPro Insights
As The Scotts Miracle-Gro Company (NYSE: SMG) articulates its strategic vision for growth and operational efficiency, investors may find interest in the company's financial health and market performance. According to InvestingPro data, Scotts Miracle-Gro has a market capitalization of $3.66 billion, reflecting its standing in the industry. Despite a challenging economic landscape, the company has managed to maintain a consistent dividend, with a yield of 4.26%, underscoring its commitment to shareholder returns for 20 consecutive years.
InvestingPro Tips suggest that while Scotts Miracle-Gro was not profitable over the last twelve months, analysts are optimistic, predicting the company will return to profitability this year. This aligns with the company's own forecasts during their Investor Day event, where they expect to achieve an average annual growth rate of 3 percent and a return to historic adjusted gross margin rates above 30 percent. Additionally, the valuation implies a strong free cash flow yield, which is anticipated to exceed $300 million annually post-capital expenditures, further supporting the company's strategic initiatives to reduce debt and invest in growth.
For those looking to delve deeper into the financial metrics and strategic outlook for Scotts Miracle-Gro, InvestingPro offers additional insights. There are a total of 6 InvestingPro Tips available that can provide more comprehensive guidance for investors. To explore these further, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, enhancing your investment research with valuable analysis and data.
With its next earnings date slated for July 31, 2024, investors will be keen to assess whether the company's strategic initiatives are translating into the projected financial outcomes, particularly in terms of profitability and market share growth within its U.S. Consumer and Hawthorne segments.
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