MAINE–(ENEWSPF)–August 8, 2011. Blaming bad weather, the leader of the world’s largest lawn chemical company announced this morning that Scotts Miracle-Gro earnings slipped 37 percent from May through July.
The value of the publicly traded company has likewise plummeted during that same period, from a high of $60.62 per share on May 10 of this year, to $41.44 as of 11 a.m. today.
“Through mid-March, consumer purchases of our products in the U.S. were up 13 percent, but then the situation changed dramatically,” said CEO Jim Hagedorn in a widely circulated release. “The challenges we saw from weather this year are unparalleled during my life-long tenure in this industry.”
Company insiders hope that fall sales of grass seed, for lawns that have suffered in droughts, will help the struggling company rebound to some degree. Given that it’s only early August and the company’s strongest cash period — weed ’n feed season in March-May is at least seven months away — many expect more changes.
“The mood here is dour . . . waiting for the next shoe to drop,” said my colleague.
Scotts Miracle-Gro sold off its commercial division to Israel Chemicals Ltd. for a reported $270 million in cash in March, saying at the time that it wanted to focus on the consumer market. Since then, however, the company has lost more than that amount in its market capitalization due to the drop in its stock price. Today’s poor earnings report certainly won’t help, just as the company prepares for next week’s all-important Independent Garden Center trade show on Navy Pier in Chicago. That’s where many retailers, already suspicious of Scotts and Hagedorn, will make their purchasing decisions for 2012.
Scotts has also ruffled its share of feathers by gaining preliminary approval from the federal government to sell genetically modified bluegrass lawn seed, and also for Jim Hagedorn’s statement that the company plans to go after the marijuana market in a big way. Environmentalists loathe the first move, while the conservative Bible belt regions that blanket Miracle Gro by the tons won’t be keen on supporting a company that champions growing pot.
WHAT THIS COULD MEAN
Scotts has survived stock storms and bad weather before and it will, undoubtedly, again. In recent years, after the EPA came down on the company for mislabeling pesticide products, the stock dropped into the $13 range for a brief period, before rebounding.
No one knows where the bottom of the recent market plunge will be found — for Scotts or anyone for that matter — but it’s unlikely that Scotts will completely tank due to its brand recognition pre-eminence.
Still, the latest financial turn of events does appear to create openings for the organic lawn care sector. Scotts invested heavily last year in Whitney Farms, its organic division. But that hasn’t taken off anywhere near the rate the company had hoped. Espoma and others with a proven track record in organics are still holding their market share according to numerous reports.
Add in the reality that organically tended properties will withstand drought far better than chemically treated counterparts — and that droughts are a now way of life — and it paints a favorable picture for the future of an organic lawn care industry outside of the Scotts headquarters in Marysville, Ohio.
“We’ve got some very, very tough decisions to make,” said my colleague at Scotts. “The commodity market and fuel prices are out of control. Consumer perception in the lawn care space is shifting rapidly and we’re kind of stuck in no-man’s land. We’re chained to the high-profit chemical products, but we can definitely see the future, too. How do we change (toward organic products) and keep delivering dividends to shareholders? It’s a scary challenge.”