Despite Q3 declines, Scotts gathers momentum

Scotts Miracle-Gro reported declines in sales and income for the third quarter of 2014, but pointed to momentum that may place the company at the top end of its guidance for the year.



"The second half of the lawn and garden season has been extremely strong, with positive consumer purchases against the double-digit increases we posted a year ago," said Jim Hagedorn, chairman and CEO. "Our momentum is carrying into the fourth quarter with consumer purchases in July at an all-time high and our European business on track to have its most profitable year ever."



Net sales for the three months ended June 28 were $1.12 billion, down about 2% from $1.14 billion in the year-ago period. Scotts largely attributed this to a 3% decline in the Global Consumer segment, which saw lower unit volume in the U.S. this quarter. Meanwhile, Scotts LawnService sales jumped 3% to $92.8 million.



Additionally, net income was $121.7 million for the quarter, down from $148.2 million in 2013.



Scotts estimates that gathering momentum from June onward will likely place the company at a 1% to 2% year-over-year net sales increase for 2014, up from its previously issued guidance. A jump of 100 basis points in adjusted gross margin is also expected.



"Based on our continued momentum, we're now confident that full-year earnings are trending toward the high end of our previous guidance range with upside potential depending on results for the balance of the year," added Hagedorn. "We also are finalizing plans to increase our focus on shareholder-friendly actions. Within the coming weeks, we expect to announce returning roughly $125 million, or about $2 per share, to shareholders during the fourth quarter."