: Scotts Miracle-Gro’s first Super Bowl ad is part of an effort to keep new customers acquired during COVID

United States

Scotts Miracle-Gro Co. SMG, -0.34% is having a week of firsts, reporting its first first-quarter profit and debuting its first Super Bowl ad.

The company hopes to use this momentum to hold on to the new customers it has acquired during the COVID-19 pandemic.

“While we believe some level of remote work will be permanent, including for Scotts, a lot of people will eventually go back to their offices, back to their kids soccer games, and once again head off to summer vacations,” said Scotts Chief Executive James Hagedorn during the earnings call, according to a FactSet transcript.

“But that doesn’t mean they’ll have to give up their garden or their lawn. We’re working hard to make sure they don’t. We view the broad reach of the Super Bowl as a good investment, especially given the other PR and marketing activation that comes with it.”

Scotts reported adjusted earnings per share of 39 cents, well ahead of the FactSet consensus for a loss of 77 cents. And sales totaled $ 748.6 million, up from $ 365.8 million and also far exceeding the FactSet consensus for $ 595.0 million.

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The timing of the ad, according to Hagedorn, coincides with consumers’ desire to get outside and get back to their gardens and lawns.

Even with the strong showing, Scotts is cautious about the path ahead.

“I’ll remind everyone that the tough comps don’t arrive until May and June and about half of U.S. Consumer POS [point of sale] has historically occurred from May through fiscal year-end September,” Hagedorn said.

“As a result we’re going to take a conservative approach before reassessing our current guidance.”

Scotts is guiding for fiscal 2021 sales growth of 1% to 6%, up from previous guidance for flat to 5% growth. The FactSet consensus is for sales of $ 4.49 billion, suggesting growth of 8.6%.

The company reaffirmed guidance for U.S. consumer segment sales that will be flat to down 5% after a quarter in which sales were up 147% to $ 408.2 million.

The Hawthorne Gardening Co. segment, which is focused on items for indoor and hydroponic growing, was up 71% to $ 309.4 million. Scotts raised its guidance for that segment to growth in a range of 20% to 30% from 15% to 20% growth.

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Scotts’ adjusted EPS outlook is for $ 8.00 to $ 8.40. The FactSet EPS consensus is $ 8.69.

Analysts were confident about the year ahead even if the company opted to remain prudent.

“Though management opted to leave its fiscal 2021 EPS guidance unchanged, we view this as justifiably conservative with the vast majority of the season ahead and very challenging base period comparisons in the second half,” wrote Raymond James analysts.

“That said, we see the potential for upward guidance revisions throughout the year, and believe the stock continues to offer compelling value on a sum-of-the-parts basis.”

Scotts stock was trading at about $ 236 on Friday.

Raymond James rates Scotts stock strong buy with a target price of $ 290.

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Scotts says retailers are already building inventory. Lowe’s Cos. Inc. LOW, +0.70% announced at the end of January that it would be hiring 50,000 workers for the busy season.

“Throughout the quarter, but especially in December, retailers aggressively stepped up their ordering,” said Hagedorn.

“While a positive indicator of retailer commitment, we are assuming for now this represents a shift in the timing of sales between quarters rather than a full-year increase in sales.”

Scotts stock has nearly doubled, up 91.4% over the past year, while the S&P 500 index SPX, +0.39% has gained 16.6% for the period.