Scotts Miracle-Gro (SMG) Q3 EPS Up 12%

Scotts Miracle-Gro (SMG -1.18%), a major player in consumer lawn and garden products, released its fiscal third quarter results on July 30, 2025. The company's most important news was a significant profit beat: non-GAAP diluted EPS came in at $2.59, comfortably ahead of the $2.26 analyst forecast. However, revenue (GAAP) was $1.19 billion, slightly below both the $1.20 billion (GAAP) reported a year ago and the $1,226.93 million analyst estimate. Gross margins (GAAP and non-GAAP) improved, and U.S. Consumer revenue posted a modest gain of 1%, but total revenue (GAAP) slipped 1.2 % year over year. Overall, the quarter reflected progress on cost control and profitability, offset by softness in top-line growth.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q2 2025 earnings report.

Understanding Scotts Miracle-Gro's Business

Scotts Miracle-Gro is a leading manufacturer and marketer of branded consumer lawn and garden products in North America. Its core brands include fertilizer, grass seed, weed control, and pest control products, most notably the Scotts, Miracle-Gro, Ortho, and Roundup brands. It holds strong partnerships with major retailers and maintains a high degree of market visibility thanks to sustained advertising and prominent retail placement.

Key factors for success include the health and strength of its consumer-facing brands, the ability to leverage its exclusive distribution agreement for Roundup weed control products, and strong relationships with retailers like Home Depot and Lowe’s. The company’s fiscal year is highly seasonal, with most sales occurring in the spring and summer. Efficient inventory and supply chain management, especially during peak season, is essential. The company’s priorities have recently focused on cost management, expanding gross margin, and increasing consumer engagement through product innovation and marketing shifts.

Quarter Highlights and Financial Developments

This quarter, profitability exceeded expectations. Non-GAAP diluted EPS reached $2.59, outperforming the analyst estimate by 14.6 %. The beat was driven not by soaring revenue, but by margin improvement and ongoing cost controls. While company-wide revenue was down 1% in the fiscal third quarter from the prior year and missed the analyst forecast, U.S. Consumer segment showed a 1% increase in net sales. U.S. Consumer accounts for the majority of the company’s results, and its segment profit (non-GAAP) grew 12% to $235.5 million, reflecting better efficiency and steady consumer demand.

The non-GAAP adjusted gross margin rate jumped 2.9 percentage points to 32.1% in the fiscal third quarter. Key drivers included reduced material and manufacturing costs and a greater share of sales from higher-margin branded fertilizers and soil products. These gains came despite heavier spending on promotions and retailer-partnered marketing. Selling, general, and administrative expenses (SG&A) increased 4% year over year, in line with management’s plan to invest in brand support and shopper activation.

The Hawthorne segment, focused on hydroponics and indoor growing, saw net sales decline 51% to $33 million in Q2 FY2025. Its net sales fell 54% to $31.2 million in Q3 FY2025, and segment profit (non-GAAP) dropped to break-even. Management confirmed it remains on track to divest this segment, with plans to take advantage of up to $100 million in tax benefits in future periods. In contrast, the “Other” segment, which includes Canada and miscellaneous international business, saw net sales rise 8% (GAAP) and segment profit climb 44% (non-GAAP) in Q3 FY2025.

The company’s product lines are evolving. In FY2025, the company launched new products, including the Miracle-Gro organic fertilizer series and OM Scott natural grass seed and lawn fertilizer and captured demand from new consumers. Promotional efforts, such as multi-bag lawn fertilizer deals and retailer partnerships, resulted in U.S. Consumer point-of-sale unit growth of 6% in Q3 FY2025. That means more customers chose the company’s products, even if discounting weighed on average selling prices. Promotions and marketing also narrowed the price gap with private-label competitors, helping the company retain shelf space and market share at major retailers.

Looking Ahead: Guidance and Strategic Themes

Management reaffirmed its previous non-GAAP guidance for the full year FY2025. It expects U.S. Consumer net sales to grow at a low single-digit rate for FY2025, excluding non-recurring sales for AeroGarden and bulk raw material sales, with full-year non-GAAP adjusted gross margin of around 30% for FY2025, Adjusted EBITDA (non-GAAP) of between $570 and $590 million for FY2025, and at least $3.50 in non-GAAP adjusted EPS in FY2025. Free cash flow, which measures the cash left after operating and investment needs, is expected to be about $250 million for FY2025. Leverage, calculated as net debt relative to non-GAAP adjusted EBITDA, continues to trend downward but remains above long-term targets, ending Q3 FY2025 at 4.15x. There were no upward revisions to guidance, indicating a cautious approach given the heavy seasonality of the lawn and garden business and possible softness in future quarters.

Looking ahead, investors should watch for a few key developments: the company’s push to boost organic product sales, continued cost-saving efforts, and the impact of promotions on both unit sales and pricing. Successful divestiture of the Hawthorne segment will also be important for margin and balance sheet progress. No new change was declared or announced during the period.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.