The Scotts Miracle-Gro Company

Third quarter total company net sales increased 1% to $1.17 billion, and year-to-date net sales increased 2% to $2.99 billion. Year-to-date GAAP gross margin was 35.7%, up 130 basis points from last year, and non-GAAP gross margin was 35.8% versus 34.7% a year ago. Q3 GAAP gross margin was 31.2% versus 32.1% last year, and non-GAAP gross margin was 31.3% versus 32.3% last year. Q3 GAAP net income from continuing operations was $103.6 million, or $1.75 per share, versus $154.7 million, or $2.64 per share a year ago; Q3 non-GAAP adjusted net income from continuing operations was $166.9 million, or $2.82 per share, versus $153.4 million, or $2.62 per share last year. Year-to-date, non-GAAP adjusted EBITDA was $686.6 million, up 5% from $655.9 million, and leverage was 3.78x versus 4.15x a year ago. Management reaffirmed fiscal 2026 guidance and raised non-GAAP adjusted EPS from continuing operations to $4.30 to $4.45 per share from $4.15 to $4.35. They also said full-year net sales are still expected to be low-single-digit growth, though Q4 U.S. Consumer sales growth is likely to land toward the lower end because retail inventories are slightly elevated.

Nate Baxter framed the quarter as evidence that SMG 2.0 is working and said the CEO transition has been smooth. His tone was confident and strategic: he emphasized a shift toward higher-margin branded products, faster digital-first innovation, greater use of e-commerce, and more investment in AI, automation, technology, and data analytics. He also said the company is reassessing capital allocation, targets, and the share repurchase plan, with more detail expected at Investor Day.

Mark Scheiwer focused on the financial execution: 1% Q3 sales growth to $1.17 billion, year-to-date sales up 2% to $2.99 billion, and year-to-date adjusted EBITDA up 5% to $686.6 million. He said Q3 margins were hit by higher freight and commodity costs, including a $15 million increase in commodity costs above the initial plan, but gross margin expansion remains intact year-to-date. He also pointed to leverage improvement to 3.78x, lower interest expense, and reaffirmed fiscal 2026 guidance while lifting adjusted EPS to $4.30 to $4.45; he added that 2027 planning assumes pricing actions, cost-out initiatives, and continued gross margin expansion.

Analysts focused on elevated retail inventories, pricing for next year, innovation timing, and commodity inflation. Management said inventories were slightly higher than last year because of weather-related timing, but they expect retailer sell-through efforts and seasonal demand to help, and they do not see inventories as a major impediment to 2027 growth. On pricing and cost inflation, management said discussions with retailers are ongoing, pushback is normal, and they expect pricing plus cost-outs to support gross margin expansion next year; they also said they were slightly ahead of historical hedging levels on inputs like urea, while diesel and freight remain higher.