Scotts Miracle-Gro Co Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Christopher Carey - Wells Fargo Securities - Analyst : There was a comment in the press release about strong fall season across all categories and some early retailer load-in for the spring season. Do you envision any timing shifts from the March quarter into the December quarter? Are there any implications for the March quarter, number one? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Christopher Carey - Wells Fargo Securities - Analyst : Okay. Great. comprehensive. My follow-up is on Hawthorne. Jim, I think the concept of a strategic alternative for Hawthorne has been contemplated for a long while now, and there have been logistical challenges with actually getting something done, right? And so I guess, in a way, I think there's always been some desire or increasing desire to do something with the asset over time. And so I guess the question is, are you feeling like the logistical side of actually being able to do something with the asset is getting better? Or are you simply saying you remain committed to finding an alternative for this business?

Question: William Chappell - Truist Securities - Analyst : Does have a question, I guess, specifically for Nate and for the whole management team. I mean, we [duct] over the 20-some years I've covered the company about stepping up marketing and advertising and new R&D and stuff like that to grow sales. If I look at your business, there's two ways to grow top line. One is expanding the number of regular users and, two, would be expanding the basket size or the amount they spend per year. And I'm trying to understand, is there a quantifiable opportunity on either and which one has more opportunity? And how are you going about kind of expanding it?

Question: William Chappell - Truist Securities - Analyst : That's great. And just the follow-up. Tougher for us sometimes to see the changes in market share or whatever at the retail level during the season, we kind of hear it at the end. Is there an area of, be it lawn food, is it soils, mulch, something where you're super excited about, hey, we're really geared up, we can gain big chunks of market share and really grow faster. Or is it really kind of broad brush, we've got momentum overall. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Jon Andersen - William Blair & Co., LLC - Analyst : Boy, there's a lot to chew on here. I did want to say that I didn't have the mouse on my bingo card this morning.

Question: Jon Andersen - William Blair & Co., LLC - Analyst : Maybe starting on gross margin, I'd love to hear a little bit more about the cadence that you're expecting of gross margin improvement throughout 2025, but also you've kind of established this three-year goal of getting back to the mid-30s. And I think maybe, Jim, you've characterized it as that last third which would come post 2025, I believe, will be the hardest yard -- those will be the harder yards to get. And any updated thoughts on that 2027 objective and perhaps those harder yards and how you're feeling about getting back to that level?

Question: Eric Bossard - Cleveland Research Company - Analyst : I guess to start, Nate or Jim, I'm curious, strategically, as you're thinking about price and market share and gross margin and connecting those three things. You've got commodity savings this year, which is funding some gross margin expansion. Jim, you mentioned a consumer that's price sensitive. And then you also talked about market share progress. And so I'm curious, do you feel the need as we work through this year to be more promotional to spend money to -- you talked about this innovative multistep program of being more aggressive with discounts to drive consumer traffic. Is that part of it? And obviously, there's some more private label competition out there. Or do you feel like the investment in the brand and marketing is sufficient that you can power through all of that, which is basically what you did last year. How do you think about connecting those points? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Eric Bossard - Cleveland Research Company - Analyst : Okay. And then a second question, if I could. I think you talked about that your POS was up 9% or 10% last year and up 3% market, and you sound more optimistic going to '25 than you did '24 for a whole host of reasons. Is there a reason why both those numbers can't be better in '25?

Question: Jonathan Matuszewski - Jefferies - Analyst : Nice results. First one was on innovation. In your prepared remarks, you referenced natural fertilizers and liquids as part of the product road map ahead. So just curious how you see those contributing to the 3% sales growth over the medium term and how you think about innovation as a contributor to US consumer segment growth ahead relative to history?

Question: Jonathan Matuszewski - Jefferies - Analyst : That's great color. And just a quick follow-up. A lot of references to the opportunity in the dotcom channel with some of your major retail partners. Is there any way to dimensionalize kind of where you stand today in terms of penetration? And just help clarify the step for executing on that opportunity. I think it was referenced maybe some optimization of product sizes to work in that channel, but is there any? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.