Scotts Miracle-Gro Reports Decline in Sales but Increase in Profitability for Q2 Fiscal 2025

The Scotts Miracle-Gro Company reported a decline in financial performance for the second quarter of fiscal 2025, with net sales of $1.421 billion, down 6.8% from $1.525 billion in the same period last year. For the first half of the fiscal year, net sales also decreased by 5.1% to $1.838 billion compared to $1.936 billion in the prior year. The decrease was attributed to lower sales volumes in both the U.S. Consumer and Hawthorne segments, particularly in fertilizer, grass seed, and controls products, as well as the discontinuation of sales of other companies' products in the Hawthorne segment.

Despite the drop in sales, the company saw an increase in profitability, with net income rising to $217.5 million, or $3.72 per diluted share, compared to $157.5 million, or $2.74 per diluted share, in the previous year. This increase in net income was driven by a higher gross margin rate of 38.6%, up from 30.4% a year earlier, and lower impairment, restructuring, and other charges. Operating income for the quarter was $344.7 million, a 26.7% increase from $272.1 million in the prior year.

Strategically, Scotts Miracle-Gro made significant organizational changes, including the sale of its subsidiary, The Hawthorne Collective, Inc., to Bad Dog Holdings LLC for a promissory note valued at $39 million. This move is part of the company's effort to streamline operations and focus on its core business segments. The company also continues to face challenges in its Hawthorne segment due to an oversupply of cannabis, which has led to decreased sales volume and pricing pressures.

Operationally, the company reported a decrease in customer engagement metrics, with a notable decline in user statistics across its product lines. The U.S. Consumer segment generated $1.312 billion in sales, down from $1.380 billion, while the Hawthorne segment saw sales drop to $32.7 million from $66.4 million. The company’s total assets decreased to $3.537 billion from $3.924 billion a year earlier, reflecting a reduction in cash and cash equivalents, which fell to $16.9 million from $65.1 million.

Looking ahead, Scotts Miracle-Gro anticipates continued challenges in the Hawthorne segment due to market conditions and is closely monitoring macroeconomic factors such as inflation and interest rates. The company remains committed to optimizing its operations and managing costs effectively to navigate these challenges.