What Scotts Miracle-Gro (SMG) Said on Its Q4 Earnings Call

Key Points

• Scotts forecast fiscal 2027 net sales growth of 2% to 4% and adjusted EPS of $4.70 to $4.90, despite up to $100 million in commodity cost headwinds and elevated retailer inventories.
• Pricing, product mix and cost savings are expected to support margins: the company plans average price increases of about 4% and at least $35 million in supply chain savings, while projecting adjusted gross margin expansion.
• The $55 million Black Kow acquisition is expected to add 1 to 2 percentage points to fiscal 2027 sales growth. Scotts also plans to generate about $275 million in free cash flow and prioritize debt reduction toward its 2029 leverage target.

Scotts Miracle-Gro NYSE: SMG expects sales and earnings to grow in fiscal 2027, even as the lawn and garden products company prepares for higher commodity costs and elevated retailer inventories.

The company forecast net sales growth of 2% to 4% and adjusted earnings from continuing operations of $4.70 to $4.90 per share. The outlook follows a fiscal 2026 in which annual sales rose 1% and adjusted earnings per share increased 18%, despite an 11% decline in fourth-quarter sales.

President and CEO Nate Baxter said the company built its plan to withstand a range of economic conditions rather than rely on an improvement in consumer spending or the housing market. Management expects growth from its Black Kow acquisition, new products, additional retail listings and targeted price increases.

“We built the plan so we could be flat to slightly down in top-line and still deliver on our guidance,” Baxter said during the earnings call, pointing to flexibility in expenses and other parts of the business.

Branded products lift margins

For fiscal 2026, Scotts reported net sales of $3.29 billion, up from $3.26 billion a year earlier. Fourth-quarter sales fell to $303 million as retailers slowed purchases following earlier seasonal ordering, Chief Financial Officer and Chief Accounting Officer Mark Scheiwer said.

Management attributed the modest annual sales increase to a shift away from lower-margin mulch and commodity products. Branded products contributed 4 percentage points to sales growth, offsetting planned declines in those other lines.

Adjusted gross margin rose to 32.4% from 31.6%, helped by the product mix, targeted pricing and $35 million in supply chain savings. GAAP gross margin increased to 32.3% from 31.3%.

Adjusted earnings from continuing operations were $4.48 per diluted share, while GAAP earnings from continuing operations were $3.30 per share. Adjusted earnings before interest, taxes, depreciation and amortization rose 2% to $580 million. Free cash flow was $278 million.

Baxter said the broader lawn and garden category grew more than 5% in fiscal 2026, although Scotts did not capture its full share of that growth. Branded point-of-sale dollars increased about 1% overall. E-commerce point-of-sale dollars grew 24% and represented 13% of sales, compared with about 10% a year earlier.

Pricing and cost savings to offset inflation

Scotts expects as much as $100 million in commodity headwinds in fiscal 2027, Scheiwer said. The company plans average price increases of about 4% across its portfolio, though it is not raising prices in some more price-sensitive categories, including core weed control.

Head of Sales Josh Meihls said the company expects the benefit of pricing to be about 2% after accounting for consumers’ response to higher prices. Scheiwer described pricing as the biggest lever for offsetting commodity inflation, with supply chain savings providing an additional benefit.

The company is targeting at least $35 million in supply chain savings in fiscal 2027. About 55% of its cost of goods was locked in ahead of the year, compared with roughly 40% at the same point historically, Baxter said. More than 80% of urea requirements were locked, and Scheiwer said diesel and fuel-related costs were more than 50% locked.

Scotts expects adjusted gross margin to expand again in fiscal 2027. Scheiwer said the increase would likely be closer to the low end of the company’s medium-term target of 50 to 100 basis points, given uncertainty around commodity costs.

Inventory and acquisition shape outlook

Retailer inventories ended fiscal 2026 up by low-single-digit percentages at Scotts’ largest retailers. Scheiwer said the company has incorporated a low-single-digit sales headwind from those inventories into its outlook.

Meihls said the company does not expect a broad inventory drawdown in fiscal 2027 and instead anticipates levels remaining relatively flat. He said some of the earlier buildup supported category growth, while slower sell-through in May also contributed to higher inventories.

The $55 million acquisition of Black Kow is expected to contribute 1 to 2 percentage points of fiscal 2027 sales growth and add to operating margin and earnings per share, Scheiwer said. Scotts exercised its option to buy the brand on Oct. 1 after becoming its exclusive distributor earlier in the year.

Management also expects growth from new retail listings, innovation and pricing. Baxter said first-half performance would probably be roughly flat with the prior year, with growth concentrated in the second half.

Debt reduction remains a priority

Scotts ended fiscal 2026 with net debt of 3.89 times adjusted EBITDA, down 0.21 turns from a year earlier. It is targeting leverage of 3 to 3.5 times by the end of fiscal 2029.

The company expects approximately $275 million in free cash flow in fiscal 2027 and about $130 million in supply chain and information technology capital spending. It repurchased $25 million of shares in the fourth quarter under a $500 million authorization.

Baxter said debt repayment and investment in the business remain priorities. Any repurchases in fiscal 2027 would be opportunistic and would depend on the company viewing its shares as severely undervalued, he said.

About Scotts Miracle-Gro (NYSE:SMG)

Scotts Miracle-Gro Company is a provider of consumer lawn and garden products headquartered in Marysville, Ohio. The company develops and markets products designed to help consumers grow and maintain lawns, gardens, landscapes and indoor plants.

Its portfolio includes lawn fertilizers, grass seed, plant food, gardening products, pest-control solutions, soils and related growing supplies. Key consumer brands include Scotts, Miracle-Gro, Ortho and Tomcat. The company also has a history of serving the controlled-environment agriculture and hydroponics markets through specialized growing products and supplies.

Scotts Miracle-Gro was founded in 1868 and has built a broad distribution network serving retail customers, garden centers and other outlets.

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