What happened
Last month, lawn and garden care giant Scotts Miracle-Gro(NYSE: SMG) announced record fiscal second-quarter sales in its U.S. consumer segment. But today the company said that while consumer transactions of its core lawn and garden brands surged in May, the product mix has forced the company to reset expectations for the fiscal year. The news caused the stock to tank as much as 12% today. Scotts Miracle-Gro shares were still lower by 10% as of 1:13 p.m. ET.
So what
Management said its sales for fiscal 2022 won't meet previously announced projections for matching 2021 levels, "due primarily to above average declines in lawn fertilizer and grass seed, which command higher prices and margins but also tend to be more susceptible to poor spring weather."
Now what
The month of May helped Scotts close the gap in point-of-sales (POS) data versus the prior-year period. By the end of May, the year-over-year drop in POS was 6% in absolute dollars and 9% in units. But prior to the May results, those declines were double those levels. The improvement came thanks to strong results in all of its major markets in the Midwest and Northeast.
Due to the product mix, however, the company said it was disappointed with the level of replenishment orders sales. Additionally, due to rising commodity costs partly related to the war in Ukraine, the company expects adjusted earnings for the fiscal year of between $4.50 to $5 per share, well below its previous target of $8 per share. Investors weren't happy with the drastic change in such a short time, and the stock is reflecting that today.
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Howard Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Scotts Miracle-Gro. The Motley Fool has a disclosure policy.
