MARYSVILLE, Ohio — The Scotts Miracle-Gro Company announced financial results for its fiscal second quarter and reaffirmed its full-year earnings outlook based on strong consumer purchases of its products since the break of the lawn and garden season.
For the fiscal second quarter, which ended March 28, the company reported sales growth of 2 percent, or 4 percent excluding the impact of foreign exchange rates, and adjusted earnings from continuing operations of $2.06 per share.
Second quarter details
Sales in the Global Consumer segment increased 2 percent to $1.06 billion during the second quarter driven primarily from acquisitions and increased volume in the U.S. Scotts LawnService sales increased 5 percent to $30.4 million in the second quarter, with strong growth in customer count offsetting slower than expected sales in the Northeast due to a delay in the start of the spring season.
The adjusted company-wide gross margin rate was 39.3 percent, compared with 40.1 percent a year ago. The 80-basis point decline was primarily attributable to acquisitions and higher material costs for grass seed and peat. Selling, general and administrative expenses (SG&A) increased 4 percent to $219.7 million in line with the company’s internal expectation and attributable primarily to acquisitions.
Operating income from the Global Consumer segment for the quarter increased 1 percent to $272.0 million, compared with $269.5 million a year ago. The Scotts LawnService segment reported an operating loss of $22.6 million for the quarter, compared with a loss of $20.3 million during the same quarter a year ago.
On a company-wide basis, adjusted income attributable to controlling interest from continuing operations for the second quarter was $127.9 million, or $2.06 per share, compared with $136.7 million, or $2.17 per share. Those results exclude impairment, restructuring, one-time financing costs, and other charges. On a GAAP basis, income attributable to controlling interest from continuing operations was $124.6 million, or $2.01 per share, compared with $125.7 million, or $2.00 per share, a year ago.
Net sales for the first six months of fiscal 2015 were $1.32 billion, an increase of 4 percent from a year ago, or 6 percent excluding the impact of foreign exchange rates. The year-over-year change was attributable to a 4 percent increase in the Global Consumer segment to $1.23 billion, largely due to acquisitions and organic sales volume, partially offset by currency changes. Sales for Scotts LawnService increased 3 percent to $77.1 million.
The adjusted company-wide gross margin rate for the first six months decreased 170 basis points to 35.1 percent. The decline, in addition to the factors impacted the second quarter, was due primarily to the mark-to-market adjustments of fuel hedges in the first quarter. The company has begun to realize the offsetting savings from fuel purchases and continues to expect its full-year gross margin rate to be in line with 2014.
SG&A increased 3 percent to $346.6 million for the first six months, in line with company expectations and attributable to acquisitions and higher advertising to support the Tomcat brand in the first quarter.
Adjusted income from continuing operations was $59.4 million, or $0.96 per share, compared with $71.1 million, or $1.13 per share for the same period a year ago. Those results exclude impairment, restructuring and other charges, as well as one-time costs related to financing. Including those items, reported income from continuing operations for the first six months was $50.0 million, or $0.81 per share, compared with $59.9 million, or $0.95 per share, a year ago.