Scotts Miracle-Gro (NYSE:SMG) reported third-quarter fiscal 2026 net sales of $1.17 billion, up 1% from a year earlier, while reaffirming its full-year outlook and raising its adjusted earnings-per-share guidance. The company said its results reflected growth in branded products, e-commerce expansion and supply-chain savings, partly offset by higher freight and commodity costs.
President and CEO Nate Baxter, who recently assumed the chief executive role, said the leadership transition has been smooth and that the company is progressing on its multiyear “SMG 2.0” strategy. The plan focuses on product innovation, SKU rationalization, digital and e-commerce expansion, consumer engagement, and operational efficiencies through technology, automation and artificial intelligence.
Sales Growth Led by Branded Products and E-Commerce
For the first nine months of fiscal 2026, total company net sales rose 2% to $2.99 billion. U.S. consumer segment sales also increased 2% to $2.74 billion, a result CFO and Chief Accounting Officer Mark Scheiwer said was consistent with the company’s full-year expectation for low-single-digit sales growth in that business.
Branded product sales increased 4.5% year to date, helping offset expected declines in non-branded sales, including commodity mulch. Scotts Miracle-Gro deliberately exited about $100 million in low-margin commodity mulch and soil sales as part of its shift toward higher-margin branded products, Baxter said.
The company cited particular strength in Ortho control products, with sales up 15% year to date; Scotts grass seed, up 11%; and soils, up 7%. Innovation introduced during fiscal 2026 contributed $75 million in gross sales before accounting for volume trade-offs with existing products, according to Baxter. Product launches included additions to Miracle-Gro Organics, modernization of the core Miracle-Gro portfolio, Scotts Kentucky 31 Grass Seed Mix, Scotts Turf Builder Lawn Food, and Ortho Home Defense Mosquito Kill and Prevent.
Scotts Miracle-Gro said innovation launched over the past three years generated $278 million in year-to-date gross sales through June, before overlap with existing SKUs. The company is also working toward removing roughly 30% of its lowest-performing SKUs by the end of fiscal 2027 and said it is about two-thirds of the way to that target.
E-commerce point-of-sale dollars rose 27% year to date across every category and customer. E-commerce now accounts for 13% of total POS dollars, up 300 basis points from the prior year, according to Baxter. The company has also expanded distribution and activation programs with club, hardware, and rural farm-and-fleet retailers, where some retailers recorded double-digit POS growth.
Margins, Costs and Inventory
Year-to-date GAAP gross margin increased 130 basis points to 35.7%. On a non-GAAP basis, gross margin was 35.8%, compared with 34.7% in the prior-year period. Scheiwer attributed the improvement to favorable product mix, supply-chain savings and pricing actions.
Third-quarter gross margin, however, declined as higher freight and commodity costs weighed on results. Quarterly GAAP gross margin was 31.2%, compared with 32.1% a year earlier, while non-GAAP gross margin was 31.3%, compared with 32.3%.
Scotts Miracle-Gro expects a $15 million increase in commodity costs above its initial full-year plan, with most of that impact recognized in the third quarter. Scheiwer said nearly all of the company’s remaining fiscal 2026 cost of goods is locked, and it does not expect further commodity impacts during the remainder of the fiscal year.
For fiscal 2027, management said it expects to pursue pricing actions, cost-reduction initiatives, innovation and continued product-mix improvements to support gross-margin expansion. Baxter said retailer conversations on pricing are ongoing, while Scheiwer said the company expects margin expansion next year and beyond.
Retailer inventories were up high-single-digit percentages from the prior year following soft POS in early May due to weather conditions. Memorial Day weekend and June sales strengthened, with Baxter describing June as one of the company’s best on record. Still, management expects lower fourth-quarter purchasing activity as retailers work to reduce inventories, which could place U.S. consumer sales growth toward the lower end of its guidance range.
Profit, Debt Reduction and Updated EPS Outlook
Third-quarter adjusted EBITDA was $246.3 million, down from $253.5 million a year ago, primarily due to higher freight and commodity costs. Year-to-date adjusted EBITDA increased 5%, or $31 million, to $686.6 million.
GAAP net income from continuing operations for the quarter was $103.6 million, or $1.75 per share, compared with $154.7 million, or $2.64 per share, in the prior-year quarter. The result included $64 million of impairment, restructuring and other non-recurring items, primarily executive severance charges and non-cash impairments of non-core passive investments.
Excluding those items, third-quarter adjusted net income from continuing operations was $166.9 million, or $2.82 per share, compared with $153.4 million, or $2.62 per share, a year earlier. For the first nine months, adjusted net income was $390.2 million, or $6.60 per share, compared with $336.9 million, or $5.75 per share, in the prior-year period.
The company raised its fiscal 2026 adjusted EPS guidance from continuing operations to a range of $4.30 to $4.45, from its prior range of $4.15 to $4.35.
Interest expense fell to $28 million in the quarter from $31.8 million a year earlier, reflecting lower debt balances and interest rates. Leverage improved to 3.78 times at the end of the third quarter, compared with 4.15 times a year earlier. Baxter said management is aligned on reducing the leverage ratio below 3.5 times.
Management said it will provide more details on its capital-allocation strategy, long-term financial model and share-repurchase approach at its Investor Day. Scheiwer said the company intends to maintain a balanced allocation strategy that includes dividends, reinvestment in advertising, research and development, capital expenditures, debt reduction and a measured start to its authorized share-repurchase program.
About Scotts Miracle-Gro (NYSE:SMG)
Scotts Miracle-Gro Company is a leading developer, manufacturer and distributor of consumer lawn and garden products. The firm serves both retail and professional customers through an array of branded offerings that include lawn fertilizers, grass seed, pest and disease control solutions, plant foods and specialty products for indoor and outdoor gardening. Its portfolio spans well-known names such as Scotts®, Miracle-Gro®, Ortho® and various hydroponic and specialty garden brands.
Headquartered in Marysville, Ohio, the company traces its roots to O.M.
