The Scotts Miracle-Gro Company (SMG) 31 Jul 242024 Q3 Earnings call transcript

Good morning, and welcome to Scotts Miracle-Gro's Third Quarter 2020 Earnings Webcast. I'm Aimee DeLuca, Head of Investor Relations. With me this morning are Chairman, President and CEO, Jim Hagedorn; and Chief Financial and Administrative Officer, Matt Garth. Jim will provide an overall business update followed by Matt with a review of our financial results.

During our review, we will make forward-looking statements and discuss certain non-GAAP financial measures. our today. could that what materially aware share we be actual differ results from Please to Form risk refer of impact Please our results. the for the our full details SEC range of factors could XX-K that filed with

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As archived always, on at recorded. today's session will version our be An investor.scotts.com. published will be website

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outlined market With financial for of them. an accomplished have season, performing level, reduction, foundation that do driving sales cash we metrics upon financial an comes the it improvements, Welcome, They when we leverage point everyone. consumer margin At flow, It's quarters the X greater year. matter we're and weather set we've Despite out and start year. behind we include next targets gross establishing and a value unsettled for fiscal visibility sales will growth EBITDA. metrics at improve uneven debt share, growth of us, 'XX. free against to the clear year, our and year of how we this everything into and almost to fiscal

we POS our over sales. but To also factors. more those also drive and strategically organization, point, efficiently investing and external response maximize year, to opportunities capable to to We've continue operate as on line to cost-efficient prior not a media leaner, held dollars the we control increased in expense volume focus spend only that of

we facing this is this season profitability When marketing the we'll goal. came another year. example. To of that Inventory perfect to to growth in out inventoried contributed we year, sales is XX% and we into absorption activities. and and of its We that more sluggish the major we inventory POS QX. with start, committed a COVID, over injected million meet pain peak down point dealt This issues. $XXX and were overcome significantly drawing The

improvement and each further to of Through pre-COVID and QX, with know ahead work X% XX%. conviction and of fiscal debt inflation. of 'XX of unit we're on Through plus us story We at net to X there. just our get I'm recovery growth, for community difficult holding considerable Consumer number made progress. margin we've when that until down sales our was growth were full of sustained adjusting you the off reduction. it in undertaking, more our POS When below the But I north a clearing can a things. significant delivered first months, happen. getting that operating levels achieve well have the This And totality is those but U.S. path look say we're is to we victory up performance,

for year, a and good company-wide quarter over of a year. EBITDA a sights million, more of significant guidance and sales of adjusted it profitability though to also XX% $XXX was are fourth we year. to on strong reaffirming million a EBITDA to guidance damn swing still net our ambitious plus X% our the tracking the expect last We growth our $XXX set this Even target business. We're X% garden lawn

we faced further at Leverage from X.Xx down of in a our 'XX generating ago. Xx achieve Our leverage in EBITDA, to debt than was million least will in X-year cash cry improvement. by goal enabling us less $X to flow a for far free and billion fiscal down the adjusted end is growth of the pay year QX over $XXX

By our fall below leverage year-end, Xx. will

One get mid-XX% to a to multiyear of recovery. effort margin know gross it's historic has priorities range. our been back We highest our

to leverage So listings the to sales year full significant than part to of actions and to is flow. year, build retailers deliberate points. far It target also of decline. basis to margin had the with navigate XXX past drive our X/X A we gross drive point in this crisis. we've financial points. to us space trading will improved pricing X,XXX financial favorably This by enable XXX to Those shelf margin We in our free volume. our for margin new basis recoup actions attributable cash gross our took basis promotions, years situation and during more wherewithal involve X of the big compares decline exchange

This caused The strategy we us and for and our we've margin to the right made that that established. moves XXXX share the were us but future for of positioned are foundation growth in performance points, things do gains. evident the benefits

the a knew gains. We with will big were our us of we are the these by share, business even consumer of recovery the level in bring gains part share trade-off but listen surprised retailers Our story.

single which our our ability to of into proven in share No we and and and brands time and In one This remained points. In external factors. basis has at retailers. with Scotts year, This biggest share we portfolio. adjust XXX a market we a exclude to partners. when our took you in our entire And retail spans lawn a year, a our testament share have my significant execute of I declining to so garden this terms points our want basis much firepower. what career I is flat to at mulch entire to gains seen thank Miracle-Gro, have never XXX captured plus nearly

is teams unmatched, our strong health are and the of Our sales, as supply ever. marketing brands as and chain

perceptions safety Scotts and A recent of that Miracle-Gro this study consumer showed with year the brands. increased and trust

overall the the growth in driver in Martha our and of through Our ability line soils campaign biggest capturing evident At close the the by unit innovation catalyst new share it marketing growth organic has category. POS the Stewart. soils was supported soils that in is well-received of Miracle-Gro market to been drive QX, for was a featuring significant single gains

created success Through for our partnerships, retail and us. them we

and Our promotional into We store joint to traffic. brought efforts the run and foot stores our outperforming salespeople floor. point numbers, their marketing do retailer doors, have tepid people products the promotions people significant joint advertising, the in on and initiatives

and model works that. match no and Our company garden can lawn in

headed. Now where We're let's talk with quarter. about comfortable the fourth we're

the and strong fall well. role SKUs, control We'll on advertising Day weekend. expect promotional as higher-margin reductions With activities a We during a up on key products. grass key lawn on by heavy price targeted will play supported centered seed Labor them

we our is when for the our hit a spring. with part has also kept negotiate pace will with discussion. hard time and a portfolio that retailers across costs. Pricing everyone not pricing has quarter of Inflation our Fourth be

on of We the the have will modest our X% to We retailers pricing pressures net XXXX. own be sales very least do in they in concerns to our year at to expect next and margins. approach given their pricing contribute

industry-leading in followers products brand. leading brands term, to posting strategic in a X must has in the business move seeing under new to to and side, profit. innovation to has mimic inflation. rate is branded keep just supply and from the business sales third-party a with Hawthorne LED year-over-year money, our some increase XXX% in the products up Gavita increase focusing contributor profitable X to cash first industry is pricing our of making market-leading quarter and years. Hawthorne X% led fast been launched and develop flow its Its we're Longer turnaround on Shifting a its also model. distributing continues solely Hawthorne. The try

team discussed and Hawthorne explored on where to create have but SMG. it or Hawthorne a It's the especially few separate concluded is At part, years. X our it's we've Investor partnerships of the create work for we longer-term keep when been it's now. blocks options Chris back, a his for weeks from to financial blueprint numerous for building better a while next lot their our Day profitable, solution. we

cylinders. to the about company back operating getting on all all It's

of here's the that of on is margins X% average You MAT-XX reasonable X-year through website, shareholder further value, investor that an better. EBITDA XX% grounded are but X.Xx. goals considerable leverage reductions can can ] I believe details retail below driving We're gross a These million and plan adjusted annual adjusted on direct-to-consumer deliver targeting with bridge will expansion and channels. do version. above pricing, get our and built [ innovation, but $XXX our growth the of we

bottom challenging I'm below top brands this our incentivizing outsized and get cash and Xx investments improvement. leverage growth time and line through in the in flows. increase frame and We'll line business, capital team further to

from us on we fiscal center will products. Next view innovation. the to X 'XX announced And trends, year, incremental honorary gardeners that shareholders our strain deserve. on get I for credit that place especially together Matt, type to to but Chris achieve years progress, Nate us of new Chief and advise our Officer deliver the not be and in into million for our commitments a management financial our an gardening to the next where year put our the this expedite the She'll we state month, and I just XXXX. Gardening can campaigns transition also past of Stewart of working as $XX be great returns in only our bridge the a team, year. we'll Martha and gardening to brands

banks, our retailers, their to history the the want difficult associates we're I their the and in past Board support. optimism, Scotts renewed with determination. our most of years our Miracle-Gro, resilience but The approaching for in business X and enthusiasm thank have been Directors for of

have our continue I you to welcome with on the opportunity us journey.

turn to Now, it I'll over Matt.

you're gardens and offer fruits Ohio. spring to the Hopefully, and plantings your the your good benefits from friends. lawns family all morning and Jim, and summertime, Central Thanks, with of have enjoying

below With with a maximum. business posted quarter mind, with in continued shared, consumer million updated strong into finish approaching These our overview business in debt and the Jim to that flow a we we of details performance. third results for the June. year-to-date profitability segment shared driving confidence from achieving third let's the in in give reduction, full at our in results the our X.XXx, quarter With years. U.S. ended further time line net engagement term both major the covenant leverage in get of garden adjusted us with year free $XXX and Hawthorn and division segments. benefited consumer first quarter X cash excelled the As you guidance lawn The strong

to benefited year consumer sales support media sales quarter, business increase over from the a X% over the U.S. activity propelling year $X.X U.S. billion. quarter net additional ago. promotional and consumers' year-to-date net $X prior billion increased to same for Our XX% an

to year, this in from to we order to U.S. sales million of Importantly, being shipment year revised ship our media orders third expect last yielding for we of This the growth guidance XX% that growth X% approximately through fiscal balance the within our fiscal nearly sales expect replenishment quarter year. to and end the versus phasing as year growing $XXX continue fourth said, normalize the during with year. consumer last X% net the of benefited range business quarter

activities controls as consumer we Stewart In quarter, media our a the along weed pressure. rising Scott campaigns, Scotts combat heavier third with promotional responded were to and Martha to centered in pivot to needs for pest on and and investment

last POS unit controls, year X% Let garden customers media partnership at The category points year-to-date by retailers the growing shelf share. units even the declined X July, have year. are led at as largest over helped our by lawn performance strong inventory growing share up me reiterate percentage on and our taken SMG versus action with note gains Jim's up are year-over-year. with X and prior while we deliver XX% in in Though

both our mid-July year-to-date and versus are of heavier funded through year retail by of mulch activity other essentially product and and to reflective promo continued partners. dollars POS low-priced a categories flat prior mix price SMG

to last the moving in Hawthorne, focus quarter track. year-to-date. up sales of go-to-market to change XX% Hawthorne million its proprietary on $XX X% strategy brands the on for Total compared the year. million $XXX XX% to third Now signature to and declined in Sales versus quarter segment is are distributed to brands

target. distributed of last top $X.X posted strategy QX, and this the X This discontinuation will Signature not profit compared million third-party brands, quarters the desired segment Hawthorne's of in the quarter impact sales $X.X because EBITDA Hawthorne year. having negatively the margins. is brand was in loss Given is line adjusted on of total expected decline million a profit with first effect positive in its third in company non-GAAP

segment last for increased non-GAAP on margin distribution, rate prior year. was QX improvements the total from E&O non-GAAP clear the year Roundup and commissions the to our that XX.X% commodity The rate, increased mix. to to year basis, and material for same our Let's now sight of rate as gross year-to-date product XX.X% inputs cost costs move have pricing. primarily XX.X% factors of and compared improved by margin gross well and increase partially goods On as in offset is adjusted costs. a XX.X% margin of QX to With to company. line the adjusted gross The driven lower by due from full locked, we XX%

For impact year, on to the are expected material have costs meaningful full gross not margin. any

a and in activities discussed third expect of $XX increased 'XX. SG&A 'XX benefits SG&A and cost to the the recent marketing in flat XX% compensation. as we media sales offset by to previously, compensation, drive versus variable net quarter quarter variable XX% deflation primarily On at unlock investments in expense, the higher sales, of increase basis, year-to-date As in with to we essentially spending decreased have million amortization due material well Hawthorne volume in fiscal is increased as the segment. increases a

these decrease a ago. improved in non-GAAP last from million impact the as EBITDA together, in is million offset expense. QX $XXX EBITDA year-to-date the adjusted non-GAAP year increase adjustments adjusted million EBITDA payments amortization have when largely non-GAAP $XXX by million $XXX was Year-to-date, Taken year. calculating share-based versus $XXX adjusted XX% to little

from both million basis, Bonnie primarily JV and period operating The a a equity quarter income first the to increases aforementioned $XX attributable year-to-date 'XX include the fiscal improvements margin third and same the for volume were On fiscal recorded rate. 'XX, for the $XX the in fiscal of in excluding compared million Below in ago. equity income results impairment gross year income, $X charge 'XX. quarter was million to

$XXX in flat expect fiscal On ago to third year. basis, we to Interest projections, improvements. X.X%. million lower interest our ago, other offset X% 'XX 'XX. generation discount average free in were by year-to-date year a partially accounts $XX operations rate latest to levels, cash declined X.X% million increase to than year $XXX from from nearly million XX% and a their the from on million year June by by as XX in driven quarter interest profitability Borrowings $X of compared end expense weighted flow Bonnie Based and from an receivable, fiscal debt the or decreased expense lower sales to of approximately of a net inventory last or due

year. Additionally, cash over free fiscal on remain balance the to end of hand billion increased to flow in $X $XXX years million the from on $XX cash of by 'XX. million We last deliver track X

fixed costs income rate under million the facility the notes swap combination $XX rates approximately interest quarter Interest of and AR third the XX% fixed with a Discount through expense remain approximately agreements. was of end of associated long-term other in QX. rate as included sale and

increase offset impact of last discrete relates year-to-date nondeductible expense compensation compared The year. partially executive tax adjusted by third the items. through tax lower XX.X% higher to quarter Our XX.X% was rate the to unfavorable

the 'XX year-to-date due short-term FY and increased media purchase shares prior both 'XX share behind and consistent us, with strong and increased QX remainder about year XX% full ago million Through from the a year. visibility incentive of POS through for the of X.X issuance quarter, 'XX. share QX, Through awards count primarily to to providing shares more end related the year our long-term is than with and FY of

finish and and in further line our and growth beyond. in poised margin improvement guidance We the FY expect to with 'XX are year for

targets midterm recent outlined site you the invite Investor our at I our investor to review financial Day. to high-level visit

gross return a to and the capital mid-XXs questions. balanced X move years, now rates the margin from we flow we next the we as allocation more With free cash expect on please that, open Operator, sheet. Q&A. strong balance benefit line continued to and improved to can Over an for

Instructions] [Operator

Our first with James. question Altobello Raymond comes from Joe

to basis as cadence to think that we the weeks those asking the in 'XX targets? I expansion. be a unusual should I'm XXX growth want gave margin at think point gross ago, about case as anything annual targets question, about year. points revenue you of back in next is, guess I X% annual our of what Is we that FY . the base couple So there this first go us X-year the of

we of little a But it was think years. I Day, that say you we at next X that, the as detailed to couple the you to Investor know, prudent a roll how Nate I vision over spread that gave of and could across would years. be lumpy. might as out be just And that

at we've 'XX. 'XX. wouldn't of 'XX the look There's right, cost in in 'XX, we was to structure out some our you going but raw come coming As a bit, little get material that of savings said in

of think but about remarks, and with 'XX So team what not 'XX. see that 'XX retailers. also on was going it's the and end start that you Jim you I yet, of think And prepared been continuing on it pricing. a the quarter. in fourth might deep alluded doing margin in at bit to detail path. the recovery recovery more working versus 'XX to a little okay 'XX the into we'll for And in has component But that and other guidance maybe to what 'XX, bit the is as more 'XX again, then

and quarter. through know takes fourth now You that the place

maybe, about. And want, you you Nate, talk just so if can

to going now of aggressive probably our I cost outs, bit more in opportunity for Yes. we're only we the but that our we and right finish you -- thinking say see Matt's how Matt. but years? of not base indicates from nothing Thanks, being think Like about looking innovation a right. pricing process retailers. that start next have and not of little would our We we're also and in our you're 'XX, the I with middle couple our That's solid 'XX 'XX. with we're a said, how

little think right I to the track. a So tell on I early the you're story, it's but think full

Got it.

just maybe then M&A The from And maybe at point you're Okay. you're what looking X that. standpoint? from understand follow on an up to expecting us acquisitions, help

payment. qualities. I Scott's equity sort the garden risk who, partners and I acquisitions describe Bolt-on the very that Well, on look, low of a accept have largely And integration would side. can think, lawn in

it. So that's about we're kind thinking of how

And our next question comes from with Grom UBS. Peter

Maybe the you But maybe has question step we to the to a when margin over the kind -- can of just margin last you're maybe when asked. the just, margin back the back that several to way the and the savings think compression of any years, Just drivers of is? Matt, back, recapture Joe big material 'XX, going around about frame going how going -- to taking we raw that. more is there different comment opportunity compression

So think start. that would just about any think, way process, where be are in helpful I to we to just

on kind about plus come consumer moving a We've the through the that of XXX thanks myself, the consistent again that's basis we've 'XX, I past years period. inflationary covered coming viewpoint out opportunity all result couple the third in ourselves of result period. quarter. points to sitting basis It's gross through about now in been as time really find margin. over reiterated a talk the framing come Nate, And Jim, we points that over for of the and lost to of think because as X,XXX we of And the ability we've price

points. impacted against at have lot when frame are that that looking us. of look towards recovery remaining inflationary that those that, now geared you we said in factors have the that at XXX is And the pricing a of basis What you

roughly little impacted for So raw of is of more years. then Again, those have in us. where to additional a come we've inflation network, where taken our Yes, inflationary that our the materials, have than our regain half pricing. us where cost us, in are structure those in that. couple you've through distribution past seen impact over positions But areas labor force, factors which also

lumpier. caveat that pricing we've is, recapture you year, again, as So that takeouts X.X% X% frame. of that time this about we're move with points the a then supply how regaining roughly the pricing come outs, over plus the to just combination as cost as be we over we cost be that helping means the that you and gave forward, more going the that But and and of X really into again, XXX then gaining efficiencies at talked basis going solves might the is a look we to call each the of we next and also, pricing that recovering beginning of chain that years, also told little also some

you I gross next maybe that savings say incremental you would coming Okay. follow-up, just Or a or to Great. extra Is think within That's mean anticipate? the million kind maybe the of so incremental be of your $XX to offset an you really long-term helpful. that I SG&A incremental -- profit And -- is is I that then investment going dollars investment? by year. you by be mentioned target that just Matt. that, offset the going margin say range? expansion mean,

this not to look of getting you at into more. XX% $XX to basis range. we're we as spend to XX%, we've the going million So to told high end on end again, we're guidance, that a total XX% middle year SG&A but going

that of that what think prudent And move into future. I it is into creating mean? much come towards team to towards Everything all this we're as and support this XX% of be But for are end company a what range. for will is innovative doing, year, at stronger flexibility additional our gearing consumers to the we for does whether are the going that to where this it's positioning it's to that top last brands, products XX% say our is the we year, all we that this. full

that about. in on we million, of additional top results spend the year immediate did good feel $XX this has we 'XX media very That

Jim pass So probably and Nate. it over I'll to

And team you would is, say One is I meeting I a of business what Board Okay. Friday run do got asked I've Nate to his this Peter, things need properly. to the and say what do

think this for I you do the have the brand that to we new guy, new And the multiple really is think part I it here And looking partner, perfect at team, or environment. [ to really a competitive is is to of brands. need after it line going what products it's marketing while don't us the is ] time choking our say got support SEJ. Xevo as of

I working advertising think support business they're doing funds, do what the retailers. with we their with and marketing

their that's lessons And don't that. know in And franchise. We we that. need

it's I spending they're to we're up do Long show what today. and in wish probably So don't list, I mean with think what I that's a sense be. casual going a double that to that term, think going

got table. are we at the remember investors figure out Now, investors company how in too, to biggest and to the got run, that business maybe sitting profitably a to this we we do and sort of are

do behind And but so this which can. to going spend that we is the to part time, see that in have get I we throttle we're as fast going as to we to need this business, that to is have you're what think

to the biggest meeting, is guys think, we it's like back what I call long where business? that some which innovation not And been, while to think of, call I that plus but community And incremental is gets where get money. think need think number. that's, feel this which do brand is within way to it, finance XX%. you challenge between the sort point back the just they've will and to trick without the community is, And Media, planning margins Do margin run $XXX need think to in so sort do exists area that -- of go direct is that we here the is horizon this historically support, a it, the Board you operating P&L. that the consumer, to driving we we and our be to is tension to helping of Direct can trashing how But that I stuff, my pay for going this or them to million which our ratios the is

it. of that key spend, Nate that a X into in the in those past and And respond, do looking stop the and for consumers growth component investments. to that get and we've we years, want seen we maybe are

And we spend. a provide so percent us SG&A more can yes, will line of growing top that

that's what is Jim about, so talking dynamics. those And

the is we'll so a maintain towards our there growth of lines. on and overall... clearly, all discipline And But path the improving

Look, think expenses which is went came it think we of $XXX -- million to sort I of news And the good that's business. out into where that guide a the X/X back that I we're far, it cut of So of of about that use going. as

Jon next question with William And our Andersen Blair. comes from

some terms. XX% And you kind and you -- us I of making. to do dollars consumer U.S. are the growth just that of of business, outlook Could kind flat your with us dollar help sale point the with but on to know help in You you X% X% or bridge me for up connect in X% flat units given the in through sale? X% mid-July, revenue investments the point But walk that? of how can said are that retailer there some there the are And things we control, growth mid-July. through through it's

little That you Yes, right? what little the bit necessarily thank and there of correct. because to at register, always POS comes leading what mix. are the our you in dollar POS you. here versus at remarks, dollars When XX% shipments. it our up detail is for more About the look the XX% you we said prepared and of flat through let a for the revenue tied dollars. not Point-of-sale unit, just very witness that happens clean, me a That's

partners. through our of So things, of that soils selling a is a with really strategic are good lot positions and we those -- all good mulch are lot

we of The that promotional other retail partners the extended have have. and activity also our other piece is XX%

this they year. seen that So result what a to can versus price there that's dollar. in at the be POS taking lower the you've far us X% And that X% so shelf happened will

really you at looking of the and talked last anomaly the the Jon, QX in we was X% Now an year, to for Yes, year, rest X% it. there simple. to about

QX shipment QX. into a that component Just went versus

year, So $XXX-ish million about in just the taking our those in roughly based year-over-year place shipments QX has of see you on This QX. timing XX% will increase normal it. normally in a sales

full that's X% you to you to what the the that helps And X% get so math, do as for year.

If that at flat up So in it's play and you It's with a lawn if and if resulted traffic, X%. up X%. to look a mind, POS is it's don't Jon. flat at retailer add look very retailers little I'll garden, dollars, you right? just our But driving color, strategic you that footsteps,

that's the fund programs, them value footsteps driving that those into bring and incentive based larger consumers on lot the of market fund creating for and are or baskets So those we them we the retailers the a to go whether retailers.

helpful. That's second And my of question. into ties that kind

least to this? shelf success How sizing viewing regarding of So and about or them they here a are your are terms they extend XX% those in maybe the to imply what major you're commitments on lack of kind of Scotts are way ability And the because does season of new in additional space. shelf XXXX? that your up thereof in the the or in additional POS listings we having listings space at season the customers retain 'XX, of through with discussions How 'XX make discussions success or accounts and 'XX. basis the starting did

generally, big be season I was start question. think disappointing, fairly honest. a the to I That's with,

probably than that. live we I else, did a bit was goods and quite market. think everybody I But look better, if you think sort down at of thankfully, it

And I dragged goods goods, I center think business. in I I'm a a barometer double-digit call good listening I if our of -- Honestly, for you partners And were Northeast actually think as call think I market is calls. for they live indication the it, pretty these at season. significant I happened little think bit pretty to declines which trying for good can home really know look the this the that's use what to down. everything at, a so live

worked. really think what I did we

think I us promoting did a joint have the the heck numbers lot worse would think together. our I with been And out if they hadn't we businesses of worked. what looked really

are because we comes it is of because the this think but that to does. they to programs -- at we think margin that this question, I And helped we garden a trend major should back think they're customers so-called think we and -- trying And the I as be at more durable pretty bucked those happy, a not, and how they far it's know, much partners think, buy to a lot lawn I categories I footsteps. in on all in when they their our the will to focus to intact. about of went. had focus highly it -- is with think get it need come effect, goes major the when price do stuff programs that. expectation modestly do so time look at and successful I a outs. remember do not cost what I think margin season And challenged. substantial have I my help, cost at is margin, how and on And And season, and at were are if And remember were as trying change, a I Those part as to & us

that. deals that retailers, this down the the a and call revenue we was the do retailers that. a bit get, because did. a we It what down. market was from And But little it we more pretty than of we expected would we supposed year. just the was thought They to down not they What from were substantial our did didn't sort to this it with goes back call do. challenged earlier much increase expected was The numbers

so them, as those And and think even be intact expectation, enhanced. with this my is problems are and from might I discussions

maybe coming do we have much through But a year. of bunch as comfortable the on we've and with that these that, new got optimization in on I'm we SKUs last very to going that From Yes, programs I'll in as Jim. innovation some middle I build didn't where We'll the we're sit, what still 'XX. some we're started comment our around of would of again, remember, retailers. sell developing liked.

our further until good think feeling I I'll more through But story. So about of and finalize I'm where are comment the we pretty hold the plans. And right it's same get we quarter now. fourth

Andrew question our Carter from next comes . Stifel. And with

of hey, that portfolio ask, to that's that, pricing next kind year. get wanted said I you've X% you expect to I average. that And know

category, XX% you with higher into about pressure. doing? down, was was year. you last mentioned if that inputs of margin lawns top into know one more putting of that's kind Would site on when been down that what are under it's think year and seed category, specifically specifically, pricing get So I grass this the FERC,

We're still it stab make to where be drive confident to we going as it see with not given we're end we and I to FERCs particular, a going take of would I take 'XX, I'm you would and pricing, 'XX consumer retailers pushed to in selective able at transition to seeds adjustments a I It's at to has we've is. Look, get way. said. year achievable. that bit am to in pricing. to of is pricing lawns I'll Andrew, category our we we'll that. know to going want. X% not surgical. margin the in the and Maybe say, we take Jim, well that. with may But as that's where to comfortable perspective pricing get more respond the play little think be consumer and cost be areas on will a able and this work go partnership isn't in back the retailers. for going have what be to going done our And a all to lot there there's us be But look opportunity, that It's I know, in there.

since as want beginning to be a a for really market I little because see that into bit I Northeast forth lawns. was thank cool season. to the just of warm. I go weaknesses, We'll seed kind it, say everybody and in digging disappointing. I thing will I weather for some lawn. poor The am grass and but pretty elasticity comes, little kind seeds great and of mostly how the aviate Coast, grass to think the see hate brown East -- pretty back seeing, wet you the of a of think bit to been for the it's a fall us into It's it's Andrew, I personally

us the seeds. have purchasing see grass part we for is suppliers So agreements with that our -- of we'll multiyear issue on

was that grass than So grass I'm to playing grassy as we've got inventory. happened around expensive, getting in weather not -- be to a I other of lot clear going think grass bad think seed, And and with maybe but seed. the was do I me we're price what on

opportunity going And and it. like be grass so see we'll to to inventory seed the go I'd there's away, on invest behind because

in explore the But overall fall to about our saw the and think some We continue grass levers erosion market. market some we're optimistic to and fiscal on the can although just share face we're I slight year. we'll recovery that's that, of lawns. seen for in season we second pull, we've find first the seed in declining half starting of half,

had the grass with were that. on completely talking like think what's Matt hope call ], I used. And lawn -- figured nobody's we'd I inventory that before out feel seed agrees, on here we've it. because be see think how On started deals So get I happening that we front satisfied we to do there's to I personally [

probably us It's I area more because an it's important have margin. it high into category. as So would one we put work do. an for to a It's

eye our investment I is can we level about having think shades on going what of behind as We're not which giving to up, but be lawns, think we're is green the get we And objective. up. support decide volume of we unit we that be brand. would approach we be the a the can't, will then different it sort if how And to

year We our It's good roughly add into our 'XX equation. in flat. relative saying plan not Take specifically, Jim. if agree, was out enough. let me after maintain did good. sort to we of that grass share I held could to terrible On what the came just seed pretty the but Ford, we of we But it a this, category.

So business it's reimagine play. the little apathetic of on the that's of consumer. has to going We the and focus big do beginning and our overall think a lawns, a gotten consumer engage that how media we be

and which outside in we're have and bring look to new our I think, business, looking talent to remember, our lawn controls, category, actually we going lawn. bring now in both a vibrant be interim controls to to people is right in

So up you standby words I on for would date. say keep we'll to that, and

Good.

that because just points does I the in that willing itself. is just it's nursery? sacrifice. It of is on remind that that's business to then the is now. wanted the mean incremental I store I volatile ask, I of earnings going beyond X demands benefit where mean, create When recovery to us, business touch from second the to Bonnie. your you Bonnie's kind And a also don't The people know taking could think think hold be? and I you're what's expectation be

the things service we level Yes. a this, live say Look, Bonnie would we, to It's that from structural goods. they needed the totally them right, biggest love year Andrew. had went That a co-owner some probably fix on. was into We perspective. I as area supported optimistic.

that's they feedback did very to on the grow. I well, Bonnie from needs and think based retailers.

look And line. XX%, their plan a organically bottom Bonnie they will for top also we're and have grow of so to to accrete at starting that M&A sort but on

digits. Things I'll fell they live our though everybody us, said not earlier, absolutely for is down, We strategic was is tough double retailers, apart attachment even a Jim live in it which very QX. but So say actually goods. other outperformed And what it, There a goods goods. really giving out. for is live year love call the

with integrated always going own And can happy that's sure on happening the as guard make with Gardens, changing marketing and do play [indiscernible] directly with part investment. team. the of she's I'm to we're better. We So coming this in going that, Gardens Bonnie part of our to in it's of an

investment it's creating what time sports -- the space. doorsteps what greater Remember, the with backyard more That's and herbs maybe to to a part and that and or families in an in feel time a the up good you great we of at level, to we it's levels. of just on Whether fruits vegetables flowers gardening say when allowing every it's business X or And people's just play in their and ear great doing? really outdoor growing do. step enjoy allows what bringing are just we whether their So lawn of X or love conference, enjoying in them dig Andrew, great

all of investors, do that team all I discussion, heard the Bonnie X And in -- and in It's And with pipe the what the we has exceptional. is meaning sacrificing very The do. it down we've Nate, to. company know performance go further, not. so trajectory I'm I'll reacting step portfolio. and just environment you which open business you're what absolutely hope straight analysts of is able from it to in And we been lot comment, a volatile had which with and to fits even Hawthorne I where the a our that over

with the very say what to whose able do in that great we've been said we've we help a environment grow straight do results people outcome very challenged. we This get is great it's to pipe We But in were them provides products manner what business do. it greatest is going the good do and a to a down remember, satisfaction.

entire own. the So Jim the M&A, that all portfolio, is there's controls lawns media question centered growing And to should from as that Hawthorne whole on earlier consumers. to that satisfaction brands we with vision our to said the and around to more way

positions for down straight and should have, them. us to we are ways the that get there more There's pipe

We're maximize that that. as And do. mind, mission leverage that these keep everything and our to in strengths just great are you we profitability Scots think opportunity, going . that the great that we going about Greater we're today So further positions have there's to in

Our with Wells Fargo from Carey comes next Securities. Chris question

kind to put, lawn the POS need numbers. in simply QX just maybe -- see business you to do your Can of what in hit

I earlier, it missed in guess, I of if little mix bit but a a been Sorry headwind year-to-date. general, there's

that recapturing between questions. I'm some POS know Just remind still getting outlook. me, QX your on of been visibility it's but covered, your specifically that and I gap

maybe a more bit just context . that. So on

said Look, fall business Yes, on is, the it, XX% our is -- this we've Chris, business. of think Nate. I XX% call this to

addressed points as summer in lawns think, with the feeling for side looking I particular. FERC heat into We're great. given better are brutal grass response starting alluded humidity, And already Jim to that we're of going to, we've optimistic the the seed, not see price fairly on consumers and in lean to fall. we're the

I'll and of we we're to like end So there of where but got feel stop going we've the I a the in out things know messaging up, about consumer. getting and really predicting we positioned front short think there's need, it's

year margin feel specifically just or Just maybe gross versus some maybe goodness a of think better that expecting margin in margin over couple the do you of what year, seeing next of to strength is, about the or you month sort expectations and X speed expectations, you that you're you of year the pulling the base maybe can years? next gross you're you're maybe forward question do second The given and but this how do next . think ago for relative gross recapture the

Yes.

were we reiterate are that. deliver it 'XX way. XXX that Q&A, the What plus but to is basis answered a said this frame for we and this margin beginning track to So of we going at have we the on let for 'XX. recovery it points of me

roughly year. That So we That not That X XXX that. 'XX have conscious you XXXX bigger get sets points it evenly and to a able ago, may means to indication we into forward that as that we're from put missing as recovery that the we on getting at the of is about There said timing, some And we that to the was to in ago, X place, opportunity planning deliver basis feel not will be to next margin over more on we've while we impacts. we're balance weeks move X through the that Day, effort. the of Investor raw said, But like be question some we is we're of based we up, that pulling good we move noise, material XXXX. your feel the what discipline give years. think said, spread. And and the as weeks a of kind I think, of 'XX.

about a past That for the POS necessarily about for QX. to let's as to timing at, we get remember, the years So related then if the outsized. go way difference. guidance. includes to our lawns, intact those is our on there trajectory couple Nate's not we've fall talked point of very through retailer that you're Get inventories, of earlier, And fulfilling down good normal, look feeling positions. And path going the

is Our the and QX. beginning of QX retailers actually fall our QX is

see place and will load-in happens actually you a fall our QX. the fall takes that in So that our QX sell-in, in for then

year. seen I of improvement next to we're anybody basis for close for of haven't getting sort margin points Chris, But at me next it's number that like year. thrown less as ending than a XXX work budgeting is our

So down to think going we're I that. continue

now. that's paper I but more pony they're sort I than of to what think the they on that, right think up of have willing piece

with comes America. Reuter next of Our Instructions] [Operator question Bank William from

the to has relatively what on really this appearance. that the was sure housing to you nondiscretionary more in to was existing in Northeast weakness. a year? buy business. market weakness? like when excited are a contributor a just little I've question have housing the felt recession-resistant weakness do Do it home weather been the Do people new sales. I there the market improving terms homes, the lack believe this spend I'm the challenges industry attribute on of think you of bit they're you Clearly, the always

I'll it start for weather. with, was think mostly I I speak myself. Right.

think thinks business season. I never predict -- Street that. easy people people -- like like to the our tell in hear It's but want think to -- I to look outside. I It's

us. I not you become did flush do earnings good coming as T-shirt McDonald's, that's an it's at look a spring, in out out think Starbucks, if the go issue. pricing now, is as for the democrats a consumer whether it's I can just And think I think. you day the think in If

year we when know And bond long -- do -- we went that we think reprice I up. last so last fertilizer look at that instantly see we year, unit seed you knew and grass if could

outperformance. So of part QX our

got that where seed getting think but sort stuff know. of was "Hey, point a people fertilizer. to or just the think I think $XXX I of grass don't lawn like And bag that you're us it of said somebody's retailers. -- But a is great and the was for great Yes. elasticity some you couple buy. to I percent, thing to is of us, a for think the not due. I'm bag terrible, long say I near And for what this problem unless I skeptical $XXX, saying, looks it pretty But of this It's don't generally going when are of

mostly do weather, think think I pricing So I but contributed.

long need our to think I of to fabulous think business young built, term, demographics houses the them. be are need people I buy

long to reducing at if I think think interest need buy with think us, -- it's it's out people I that. But for am rates and think I pretty good Fed I down. if so demographics for think personally, a home there. hard term can today to young I mean, the I start healthy rates, come look you I personally

with what we're think scale spending. was at discretionary biggest look weather of science being and look Geek pricing, they said the [ No, I a waste. whether when sorry, okay they ], linked feel of going confidence consumer as consumers building long agreed I the prices, and there's definitely the sort IM to but was sure. Jim pinched, just And support models factor for

to move sort . label. didn't the They But private just be just wouldn't of

sort just paused was category. It of the on

Yes.

then as and has there weather issue or home existing correlation mentioned sales elasticity. pricing any been you new sales? So the to home primary Historically,

For sure.

There is.

Okay.

so maybe the be depressed I being -- those mean So weakness? that could a third -- that of component would

are over very that to of So their there's projects. and are seen if existing less on we've the people homes been years, small right? mean outside projects presale unify publications that, and small sales stories doing couple inside I that home past Yes. and projects it's slower,

working their out people we on And seen that of so was talked that into had entrance backyard. weren't last things X about necessarily or home extending yards, $XXX they front year in their environment, even homes, their were projects the rest as of to ways the we but continue the the

And so that's continuing.

and yard. debate calls, want said, We people if there you started the the a really in history XXs a in some into kids go hired in not world, of of getting couple convince have going back that their were they best who back young this so was of these think and guy, people had Depot like condos, to have the he having and And of with good this we CEO to when on want we basically yards many data some are people years. and families. [indiscernible] of said Craig I and homes he a who live is would and like it's "Jim, I demographers ourselves in but sort a look dog,

we was a generally, that I And think a seen. convince we important to X we've -- GDP were that's to company, sort that ourselves And for and couple. it, so were call a pricing, us what plus there's of of sort

concludes Thank this participating. call. time. I'm showing conference at today's This no further for you questions

disconnect. now may You