Scotts Miracle-Gro: Growth Amidst Rising Costs

Scotts Miracle-Gro (SMG) is currently navigating a landscape of growth alongside cost pressures. The company has seen benefits from its U.S. Consumer franchise, achieving a 2.1% rise in sales and a 6.1% increase in segment profit in the first nine months of fiscal 2026. Adjusted gross margin also improved by 110 basis points to 35.8% during this period.

Management has raised fiscal 2026 adjusted EPS guidance to $4.30-$4.45, anticipating low-single-digit U.S. Consumer sales growth and mid-single-digit adjusted EBITDA growth. The company maintains a strong market position in DIY products, with e-commerce sales showing significant growth of 27% in dollars and 33% in units.

Significant debt reduction is evident, with the leverage ratio decreasing to 3.78 at the end of the third quarter of fiscal 2026, down from 4.15 a year prior. This improvement is attributed to increased adjusted EBITDA and a focus on debt reduction using free cash flow. The company has maintained its fiscal 2026 free cash flow guidance of $275 million, reinforcing its balance sheet improvement strategy.

Liquidity remains adequate, supported by $195.2 million in cash from operations in the first nine months of fiscal 2026. Scotts Miracle-Gro continues to return capital to shareholders through dividends, totaling $116.3 million in the same period, while maintaining a share repurchase authorization.