Lawn and garden care products maker Scotts Miracle-Gro Co. (SMG) reported Monday a profit for the second quarter that declined 21 percent from last year, reflecting a double-digit and lower margins amid lower sales volumes. Both adjusted earnings per share and quarterly revenues missed analysts' expectations. The company also reaffirmed its earnings guidance for the full-year 2013.
The company primarily was attributed the decline in profit to a significant delay in the start of the lawn and garden season across nearly all North American and European markets due to a colder than normal March.
"Although the weather presented obvious challenges in March, the resilience of the lawn and garden category and the strength of our brands became evident as soon as the season broke at the beginning of April," Chairman and CEO Jim Hagedorn said in a statement.
The Marysville, Ohio-based company reported net income of $100.0 million or $1.60 per share for the second quarter, higher than $127.2 million or $2.05 per share in the prior-year quarter.
Income from continuing operations for the quarter declined to $99.9 million or $1.60 per share from $126.5 million or $2.04 per share last year.
Excluding items, adjusted income from continuing operations was $100.1 million or $1.60 per share, compared to $132.3 million or $2.13 per share in the year-ago quarter.
On average, ten analysts polled by Thomson Reuters expected earnings of $2.00 per share for the quarter. Analysts' estimates typically exclude one-time gains or losses.
Net sales for the quarter declined 13 percent to $1.02 billion from $1.17 billion in the same quarter last year, and missed ten Wall Street analysts' consensus estimate of $1.13 billion.
Global Consumer sales declined 13 percent to $974.6 million, with U.S. sales dropping 12 percent, and international sale decreasing 15 percent on constant currency, primarily driven by lower sales across all product categories.
Scotts LawnService revenues also decreased 8 percent to $32.9 million from last year, primarily due to a delay in the start of the spring season.
"Consumer purchases of our products in the U.S., which were down more than 25 percent on a fiscal year-to-date basis entering April, are down 9 percent through May 5 after five consecutive weeks of strong year-over-year growth," Hagedorn added.
Gross margin for the quarter contracted 230 basis points to 37.2 percent from last year, due mainly to lower sales volumes and higher material costs, partially offset by price increases.
Looking ahead to fiscal 2013, the company reaffirmed its expectations for adjusted earnings from continuing operations in the range of $2.50 to $2.75 per share. The company also continues to expect operating cash flow of at least $250 million for the year. Street is currently looking for full-year 2013 earnings of $2.61 per share.
"The positive momentum in consumer purchases in the past five weeks, favorable weather forecasts and progress on cost-out efforts give us confidence in our ability to drive strong improvement in gross margin, especially in the third quarter, which is critical to meeting our full-year guidance," CFO Larry Hilsheimer stated.
SMG closed Monday's regular trading session at $46.56, up $0.75 or 1.64% on a volume of 0.79 million shares. However, the stock lost $1.06 or 2.78% in after-hours trading.
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