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Scotts Miracle-Gro Forecasts Its Marijuana Support Business Will Grow Sales 30% to 40% in 2021

By Rich Duprey - May 5, 2021 at 1:28PM

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The company's Hawthorne hydroponics unit has significantly more upside than its consumer lawn-and-garden business.

Scotts Miracle-Gro (SMG 1.42%) saw across-the-board gains in its fiscal second quarter, with revenue hitting a record $1.83 billion as its consumer-based lawn and garden business enjoyed 23% growth from the year-ago period.

Although its Hawthorne unit is still the smaller of its two reporting segments, the division, which serves as a "picks and shovels" provider to the marijuana industry, saw sales surge 66% in the quarter, which ended April 3. The company now forecasts that Hawthorne will grow sales by 30% to 40% for the full year.

A hydroponics-based marijuana grow system

Image source: Getty Images.

Like the long-ago merchants who made their fortunes selling miners the tools they needed for their attempts to find wealth in the Gold Rush, Scotts Miracle-Gro's Hawthorne business provides many of the essential tools marijuana producers require in order to grow their green gold.

Hawthorne manufactures and sells hydroponics equipment, which lets people grow plants with just water and no dirt; grow media; lighting; and more. Its offerings can suit the needs of producers of any size, from backyard gardeners to commercial operations, and can be used to grow any type of plant, not just cannabis.

Sales hit almost $364 million in the fiscal second quarter, and now represent 20% of Scotts Miracle-Gro's total revenue. 

Over the years, the company has made numerous acquisitions to support the Hawthorne division, including lighting makers Sun Systems and Gavita, and Can-Filters, a ventilation products maker for the hydroponics market.

The robust nature of Scotts Miracle-Gro's outlook for its Hawthorne marijuana support business notably contrasts with the more muted guidance it offered on its consumer products business. Although it reaffirmed its outlook for 4% to 6% sales growth for the year, with additional growth possible, it also expects gross margins to decline by as much as 225 basis points due to higher commodity and distribution costs.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Scotts Miracle-Gro. The Motley Fool has a disclosure policy.

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