Scotts Miracle-Gro (NYSE: SMG) reported Q2 EPS of $5.44, $0.02 better than the analyst estimate of $5.42. Revenue for the quarter came in at $1.83 billion versus the consensus estimate of $1.73 billion.

• Hawthorne sales rise 66% in Q2 with strong growth in all product categories
• U.S. Consumer sales rise 23% driven by continued increases in consumer demand
• GAAP EPS: $5.44 versus $4.43; Non-GAAP adjusted EPS of $5.64 versus $4.50
• Company affirms plan to increase pricing to offset continued commodity pressure

“The record level of consumer demand we have seen for our lawn and garden products is greater than we expected and may provide upside to the updated guidance we provided for our U.S. Consumer business in early April,” said Jim Hagedorn, chairman and chief executive officer. “Consumers told us entering the season that they intended to stay engaged with lawn and garden and, so far, that is exactly what they are doing. Retailer support for the category remains strong as we enter a period of challenging year-over-year comparisons.

“We also continue to exceed expectations at Hawthorne as we reported our fifth consecutive quarter of sales growth in excess of 60 percent and another month of strong results in April. Given the current momentum of this business, we feel comfortable once again increasing our sales guidance for Hawthorne to a range of 30 to 40 percent growth on a fiscal year basis.”

Full-year outlook

The Company now expects Hawthorne sales to increase 30 to 40 percent for fiscal 2021. While it reaffirmed its sales outlook for the U.S. Consumer segment of 4 to 6 percent growth, the Company said sales growth in the segment continues to trend above that level and believes upside to be possible on a full-year basis. The gross margin rate is now expected to decline 175 to 225 basis points with the added downward pressure due to higher commodity and distribution costs. All other aspects of its fiscal 2021 guidance were reaffirmed, although management said it expected to provide an update on its full-year expectations in early June.

“We continue to see tremendous momentum in all aspects of the business, and we are extremely optimistic in our ability to drive another year of record results,” Hagedorn said. “Obviously, consumer activity in May is extremely important, and it is historically one of the most critical months of the lawn and garden season. That said, we are encouraged by the level of consumer participation we have been seeing so far this season and are optimistic that consumers will remain engaged throughout the season.”

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