Scotts Miracle-Gro Co Q4 2025 Earnings Call Transcript

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

Question: Jon Andersen - William Blair Capital Partners - Analyst : Nate, following on your comments around the focus on the branded business, branded sales, and the mix shift associated with that, wondering if you could talk a little bit more about how the lawns work that you're doing, the long strategy, which you've talked about to some extent, fits into that and how that branded focus and some of the changes you're making in the lawns business can work synergistically?

Question: W. Andrew Carter - Stifel, Nicolaus & Company Inc - Analyst : I wanted to come back to the private label point you made. I know that there was a bifurcation in approaches this year, and you reiterated the branded solution. In totality, did that focus, that unique focus, hurt you or your numbers? Or was it ultimately a trade-off that you just -- it was a zero-sum game and you were indifferent to it and really, the biggest challenge view would be a universal approach of private label that would impact you? Hagedorn here. I mean, a couple of ways I would approach that. Number one, I don't feel like we're under private label pressure at all. I've been running this business for a long time, and I've seen it where there's been much more significant pressure. I think the last time we talked, we calculated we were up 2%. I think we ended the year about 1% up in share, which given the amount of share we have in our categories, I think is fabulous. So I think where we got pressure and at least where I heard about it mostly on like these calls with one analysts who wrote about that. I think we looked at it and said it's -- remember, we don't make hardly any margin on our commodity business. A lot of it we do for retailers. It's important in the category. But the biggest thing was when people told me we were like out of capacity on mulch and we're like on third party, it was -- so on a business we made nothing on, we're like paying other people to make it for us. Plus there was a lot of activation dollars going behind it. Nate and I just made the decision like, we're just -- we're going to pull away from this. And take -- the biggest thing is take the activation dollars and put the activation dollars against the branded business. We know that works, and we're not talking insignificant money here. So I think refocusing that money on away from commodities. And by the way, I've been involved in a lot of these discussions with our largest retailers. There is a very, very significant commitment to our programs next year, less private label pressures than we had before. And so we aren't that interested in the commodity. There are other people who are happy working with no margin. That's good for me. We're willing to play. We're not willing to play to lose money. And the activation dollars are going to go where we make money. And what we're seeing is a really good reaction to that shift change for us.

Question: W. Andrew Carter - Stifel, Nicolaus & Company Inc - Analyst : I guess to speak to activation, I wanted to back up on a number you gave a while ago, $200 million advertising support. And there's some puts and

Question: Joe Altobello - Raymond James - Analyst : I just want to go back to the outlook for sales for this year and I guess, even further back than that. When we were together in mid-2024, given -- at the Investor Day, you talked about 3% US consumer sales growth. We're obviously very low single digits this year, and it sounds like low single digits next year. So I guess my question is, how do we get back to 3%? Because if I do the math, that would imply 27% would be up, call it, mid-singles. So is that the mix shift toward branded? Is there a very robust innovation pipeline in '27? But how do we get comfortable with that ramp in '27, I guess, is what I'm asking. I back up to this year. I don't really want to share our incentive targets on this call. But put it this way. The incentive doesn't even pay target if branded both doesn't hit 5%, okay?

Question: Jonathan Matuszewski - Jefferies LLC - Analyst : My first one was on AI. Nate, you mentioned it a couple of times. There's been a lot of press about you guys seeking to digitize your library of lawn and garden knowledge. So maybe just update us on how you're bringing your retail partners into the conversation here. And do you see a scenario where maybe their e-commerce website search bars or the handheld devices their associates use increasingly lean on SMG's data to recommend your SKUs over competitors when the consumer is seeking expertise?

Question: Jonathan Matuszewski - Jefferies LLC - Analyst : Okay. And then just a quick follow-up. Mark, with the commentary about retailers ordering closer to the POS curve and the revenue shift between the half, just curious if there's any thoughts on the impact to gross margin cadence this year relative to last year, absent the effect of any Hawthorn divestiture. And I guess, similarly on SG&A, it sounds like there's more of a regular pulsing of advertising going forward versus in the past. So just curious how that impacts the cadence for maybe SG&A dollars this year versus last?

Question: Peter Grom - UBS AG - Analyst : So maybe a similar question just on profit trajectory and maybe just the gross margin guidance of at least 32%. And Jim, I think you mentioned in your prepared remarks approaching 33%. So can you maybe just walk through the building blocks. And then I guess I'm curious, just considering the outperformance this year relative to your initial guidance, are you embedding similar levels of flexibility this year? 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: Peter Grom - UBS AG - Analyst : Okay. Awesome. And then I guess, Jim, you touched on putting a multiyear buyback program in front of the Board for implementation this year. Any details you can share in terms of the size of the buyback, maybe what the impact might look like this year? And I'm assuming the answer to this is no, but the earnings guidance, that does not include any benefit from any potential buyback, right? Yeah, that's correct. Look, we have a Board meeting Friday. We've got an hour dedicated to this. I think I've talked to most of the Board members. So I think there's a high degree of support. I know Mark is supportive. And we've been working closely with our largest -- the investment banks of our largest banks to make sure they're comfortable and help us with the math. I think everybody feels like we can make a significant impact over time. So I don't know. If I was throwing a number out, I would just say -- what would I be looking for the Board over a multiyear? So this is not with a definition of how many years. But I'd say, $500 million to $1 billion would be what I'm going to be looking for. And I think Mark is not freaking out when I say it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.