The Scotts Miracle-Gro Company — Fiscal 2026 Earnings Summary

Financial Performance

• Full-year net sales reached $3.29 billion, a 1% increase year-over-year from $3.26 billion.
• GAAP gross margin rate improved to 32.3% from 31.3% in the prior year; non-GAAP adjusted gross margin rate improved to 32.4% from 31.6%.
• GAAP net income from continuing operations was $3.30 per diluted share, up 6% from $3.10; non-GAAP adjusted earnings from continuing operations were $4.48 per diluted share, up 18% from $3.80.
• Free cash flow totaled $278.4 million, compared to $273.9 million in the prior year.
• Net leverage ratio stood at 3.89x, improving 0.21x from the prior year.
• Adjusted EBITDA for the full year was $579.9 million, a 2% increase from $569.7 million.
• Interest expense decreased to $112.6 million from $129.0 million in the prior year.
• GAAP net income for the full year was $103.9 million, a 28% decrease from $145.2 million, primarily due to a $106.2 million pre-tax loss on the sale of the Hawthorne business.

Guidance and Future Outlook

• Fiscal 2027 net sales growth is projected between 2% and 4%.
• Fiscal 2027 non-GAAP adjusted gross margin rate is expected to continue expanding.
• Fiscal 2027 non-GAAP adjusted earnings per share from continuing operations are guided to $4.70 to $4.90.
• Fiscal 2027 free cash flow is projected at approximately $275 million.
• The company targets a net leverage ratio decline to a range of 3.0x to 3.5x by fiscal 2029.
• Future growth drivers include pricing, innovation, SG&A efficiencies, supply chain savings, and continued capital reinvestment.

Business Segments and Product Lines

• U.S. Consumer segment net sales were $3.02 billion for the full year, a 1% increase from $2.99 billion.
• U.S. Consumer segment profit (Non-GAAP) was $601.4 million, a 5% increase from $571.3 million.
• Other segment net sales were $271.3 million, a 4% increase from $262.1 million.
• Other segment profit (Non-GAAP) was $19.3 million, a 47% increase from $13.1 million.
• Corporate expenses were $146.2 million, compared to $134.4 million in the prior year.
• IT transformation costs totaled $13.5 million for the full year.
• The company reported growth in branded products and continued e-commerce expansion.
• The Hawthorne business was classified as a discontinued operation following its divestiture on April 8, 2026.

Market and Competitive Landscape

• The company operates in a highly competitive market with market-leading brands including Scotts®, Miracle-Gro®, Ortho®, and Tomcat®.
• The company navigated a challenging commodity and freight environment while expanding gross margins.
• Sales are concentrated among a small number of retail customers.

Risks and Challenges

• Economic downturns and uncertainty may adversely affect product demand.
• Cyber attacks or operational technology failures could impair operations or reputation.
• Climate change and unfavorable weather conditions could impact financial results.
• The company faces risks related to the successful development of new product lines.
• Indebtedness could limit financial flexibility.
• Compliance with environmental and public health regulations could increase costs.
• Loss of top retail customers or significant inventory reductions by them could adversely affect results.
• Legal proceedings and other contingencies could impact financial condition.

Management Commentary and Tone

• CEO Nate Baxter expressed satisfaction with fiscal 2026 performance, citing delivery on all imperatives and a strengthened balance sheet.
• Management described the fiscal 2027 plan as sound, relying on controllable factors to navigate a volatile macroeconomic environment.
• CFO Mark Scheiwer confirmed the company met or exceeded fiscal 2026 commitments for net sales, gross margin, EPS, free cash flow, and leverage ratio.
• Management emphasized a commitment to de-levering and advancing the "SMG 2.0" strategy to transform the business into a modern lifestyle company.

Other Key Points

• The company completed the divestiture of its Hawthorne business in North America on April 8, 2026.
• A multi-year IT transformation project commenced in fiscal 2026, with total planned investments exceeding $100 million, expected to be substantially complete by fiscal 2028.
• The company paid $154.8 million in dividends during fiscal 2026.
• The company repurchased $37.7 million of common shares in fiscal 2026.
• The company repaid $250.0 million in 5.250% Senior Notes during fiscal 2026.
• Cash and cash equivalents decreased to $7.4 million at September 30, 2026, from $32.8 million at September 30, 2025.
• Inventories increased to $577.9 million from $542.7 million in the prior year.
• Property, plant and equipment, net increased to $655.6 million from $607.6 million in the prior year.