ScottsMiracle-Gro Posts Narrower-Than-Expected Loss, Announces Major Strategic Shifts
The Scotts Miracle-Gro Company (NYSE:SMG) reported financial results for its fiscal first quarter, delivering a smaller loss than analysts anticipated alongside significant announcements to reshape its business. The company confirmed plans to divest its Hawthorne subsidiary and unveiled a new share repurchase program, signaling a strategic pivot back to its core consumer lawn and garden operations.
Earnings and Revenue Versus Estimates
For the quarter ended December 27, 2025, the company's performance, while showing a loss, came in ahead of Wall Street's expectations on a key profitability metric.
- Adjusted EPS: The company reported an adjusted net loss from continuing operations of $0.77 per share. This compares favorably to the analyst consensus estimate for a loss of $0.98 per share.
- Revenue: Net sales from continuing operations were $354.4 million, a 3% decrease from the prior year. This figure slightly missed the analyst estimate of approximately $362.0 million.
The narrower loss, despite a modest revenue shortfall, suggests progress on cost management and operational efficiency. The company highlighted a 90-basis-point improvement in its gross margin rate to 25.4% on an adjusted basis, a positive signal for profitability.
Market Reaction and Strategic Announcements
The stock's reaction in pre-market trading showed a slight decline of approximately 0.17%. This muted movement likely reflects a balancing act between the better-than-expected bottom-line result and the significant corporate news.
The earnings release was dominated by two major strategic decisions:
- Divestiture of Hawthorne: The company is in advanced discussions to sell its Hawthorne subsidiary, which caters to the hydroponic and indoor gardening market, to cannabis operator Vireo Growth, Inc. The transaction is expected to close in the fiscal second quarter. ScottsMiracle-Gro has already classified Hawthorne as a discontinued operation, and the sale is intended to be immediately margin-accretive, allowing management to focus solely on its core U.S. Consumer business.
- New Share Repurchase Authorization: The Board of Directors approved a new program to repurchase up to $500 million of the company's common stock. Repurchases are slated to begin in late 2026, contingent on the company's progress in reducing its leverage, which it reported improved to a net debt-to-adjusted EBITDA ratio of 4.03x from 4.52x a year ago.
Financial Health and Outlook
Management reaffirmed its full-year fiscal 2026 guidance, which was originally provided excluding the Hawthorne business. The outlook includes:
- U.S. Consumer net sales growth in the low single-digits.
- Non-GAAP adjusted gross margin of at least 32%.
- Non-GAAP adjusted EPS from continuing operations between $4.15 and $4.35.
- Free cash flow of approximately $275 million.
This guidance appears generally in line with analyst expectations for the full year. The company's reiterated forecast, coupled with the strategic moves to simplify its structure and return capital to shareholders, frames the quarter as one of stabilization and strategic repositioning.
Conclusion
ScottsMiracle-Gro's first quarter presents a mixed but strategically focused picture. The company beat profit expectations and showed margin improvement, though sales were slightly soft. The market's initial tepid reaction may be digesting the long-term implications of exiting the Hawthorne business—a move that ends a challenging chapter—and the future deployment of capital for share repurchases. The core takeaway is a management team executing on a plan to streamline operations, strengthen the balance sheet, and focus on its legacy lawn and garden brands.
For a detailed breakdown of historical earnings and future analyst estimates, you can review the data here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, nor a recommendation to buy or sell any security. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
