Scotts Miracle-Gro Targets 2%-4% FY2027 Sales Growth

Scotts Miracle-Gro (NYSE: SMG) projected fiscal 2027 net sales growth of 2% to 4% after reporting higher full-year sales, margins and adjusted earnings for fiscal 2026, even as fourth-quarter revenue fell 11% and the quarterly gross margin turned negative.

For the year ended September 30, 2026, net sales increased 1% to $3.29 billion, supported by 4% growth in U.S. Consumer branded sales. That growth was partly offset by expected volume declines in mulch and other commodity products.

Non-GAAP adjusted diluted earnings from continuing operations rose 18% to $4.48 per share, exceeding the company’s fiscal 2026 guidance. Adjusted net income from continuing operations increased 19% to $264.8 million, while adjusted EBITDA reached $579.9 million, compared with $569.7 million in fiscal 2025.

On a GAAP basis, full-year net income from continuing operations was $194.9 million, or $3.30 per diluted share, up from $182.1 million, or $3.10 per share, a year earlier. Total GAAP net income was $103.9 million after a $91 million loss from discontinued operations associated with the Hawthorne business, including costs related to the sale of Hawthorne’s North American operations.

Branded products support full-year margins

Scotts Miracle-Gro’s adjusted gross margin expanded 80 basis points to 32.4%. A more favorable mix of higher-margin branded products and supply-chain efficiencies helped offset higher freight and commodity costs, including unplanned headwinds linked to the Iran conflict. Targeted market-wide price increases on certain U.S. Consumer products also contributed.

Full-year branded point-of-sale sales in the U.S. Consumer business increased 1% in dollars and 2% in units. Gardens recorded dollar growth of 2% and unit growth of 4%, supported by consumer programs, Miracle-Gro Organics and higher soil sales. Controls grew 3% in dollars, reflecting gains in Roundup and Ortho Insect as well as pricing and innovation, though units declined 2% as weakness in weed control and rodent products offset growth in Ortho Insect.

The Lawns category declined 3% in both dollars and units, which the company attributed to reduced promotional activity and unfavorable weather across the category.

E-commerce remained a major growth channel. Point-of-sale sales for branded products increased 24% in dollars and 30% in units, with digital channels representing 13% of branded point-of-sale dollars. Scotts Miracle-Gro said 24% of its Amazon customers were new to its brands.

Fourth-quarter sales decline as retailers reduce purchases

Fourth-quarter net sales fell 11% to $302.9 million from $340.1 million. U.S. Consumer volumes declined as retailers slowed purchasing after loading inventory earlier in the season, while Canadian volumes were affected by elevated retailer inventories.

The fourth-quarter adjusted gross margin declined 590 basis points to negative 0.7%, from 5.2% a year earlier. Higher freight expenses, commodity costs and unfavorable fixed-cost leverage from lower volumes outweighed favorable product mix and supply-chain efficiencies.

The company reported a fourth-quarter GAAP loss from continuing operations of $124.2 million, or $2.14 per diluted share. On an adjusted basis, the loss from continuing operations was $125.4 million, or $2.16 per diluted share, compared with an adjusted loss of $113.9 million, or $1.97 per share, in the prior-year quarter.

Cash flow funds debt reduction and share repurchases

Scotts Miracle-Gro generated $278.4 million of free cash flow in fiscal 2026, consisting of $373 million in operating cash flow less $94.6 million of property, plant and equipment investment. The company continued to direct cash toward debt reduction, lowering its leverage ratio to 3.89 times from 4.10 times a year earlier.

It also used $25 million of fourth-quarter free cash flow for the first round of repurchases under its $500 million share-repurchase program.

For fiscal 2027, management expects adjusted earnings from continuing operations of $4.70 to $4.90 per share, free cash flow of approximately $275 million and further year-over-year adjusted gross-margin expansion. The company also expects its leverage ratio to continue improving and said it remains on track to reach its target range of 3.0 to 3.5 times by fiscal 2029.

The October 2026 acquisition of organic soil-products company Black Kow is expected to contribute 1% to 2% to fiscal 2027 net sales growth and positively support operating margin and earnings per share. Scotts Miracle-Gro paid $55 million for the business using free cash flow and expects Black Kow’s EBITDA generation to support its leverage goals.

Management’s broader fiscal 2027-to-2029 framework calls for annual net sales growth of 2% to 4%, adjusted gross-margin expansion of 50 to 100 basis points, adjusted EPS growth of 5% to 8% and annual free cash flow above $275 million. The company is also targeting at least $35 million in annual supply-chain savings through network optimization, logistics, manufacturing automation, product-cost reductions and strategic sourcing.

Scotts Miracle-Gro plans to invest more than $100 million in a multiyear information-technology transformation expected to be substantially complete in fiscal 2028. The program includes a new SAP S/4HANA enterprise resource planning platform, supply-chain planning tools and a unified data platform. Execution of these initiatives, retailer inventory levels, weather, promotional activity and continued commodity and freight volatility remain factors that could affect results.