In some ways, 2022 was a year when investors discovered whether the spectacular growth of some of their holdings during the pandemic was a flash in the pan.
In some cases, share prices came back to earth with a bang and lawn-and-garden leader Scotts Miracle-Gro was among them. The pandemic created the conditions once-in-a-lifetime demand conditions as lockdowns kept people at home and focused on their lawns and gardens.
Sales boomed, as a new generation of young homeowners joined in and Scotts shares doubled during the first pandemic year. They peaked at US $250 in March 2021 but from there it was a painful slide. The shares lost 83% of their value hitting bottom at $42 in September 2022.
So far 2023 has been a better year. Here’s an update:
Scotts Miracle-Gro Company (NYSE: SMG). Recent price $87.19 (All figures in U.S. dollars.)
Background: Scotts is one of the world’s largest marketers of lawn and garden care products including Miracle-Gro a best-selling water-soluble plant food. Its Hawthorne Gardening Co. subsidiary provides fertilizers and hydroponic growing systems to the cannabis industry.
Performance: This year, the shares have jumped 74% at their current price.
Developments: Scotts was a pandemic winner as lockdowns meant more time in the backyard. Its leading position and tie in with retailers such as Canadian Tire and Home Depot provided a huge tailwind. At the same time, it expanded its cannabis industry investment betting a US federal law decriminalizing cannabis was on the way. That law has yet to be passed and reopening has meant less time in the garden.
Scotts retrenched in 2022 and it has paid off, CEO Jim Hagedorn said in a conference call on Feb. 2. Scotts turned a first quarter profit for just the second time in its history led by record shipments of mulches, seeds and fertilizers. It generally ships for the spring season in the quarter but realizes little revenue.
Sales beat the plan, gross margin improved by almost 300 basis points and there is evidence that while the lawn and garden business is mature, the bulk of the new pandemic gardeners have been retained.
Scotts is continuing to invest in cannabis research at its Kelowna, B.C. facility running trials on lighting, nutrients, genetics and other technologies to improve yields, quality and energy efficiency. It expects consolidation and opportunities for high-value no-cash partnerships to further strengthen Hawthorne.
“There is light ahead. We are moving in the right direction. We have more work to do,” Mr. Hagedorn said.
Dividend: Scotts $0.66 quarterly dividend yields 3.20% at current prices.
0 comments on “Scotts Miracle Gro rebounds from 2022 selloff”