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The Scotts Miracle-Gro Company (SMG)
F1Q2012 Earnings Call
February 7, 2012 9:00 am ET
Jim King - SVP, IR & Corporate Affairs
Jim Hagedorn - Chairman & CEO
Dave Evans - CFO
Barry Sanders - President & COO
Jim Lyski - EVP & CMO
Josh Zaret - Longbow Research
Jeff Zekauskas - JPMorgan
Joe Altobello - Oppenheimer
Carla Casella - JPMorgan
Eric Bossard - Cleveland Research
Olivia Tong - Bank of America-Merrill Lynch
Mike - SunTrust
Sam Darkatsh - Raymond James
Reza Vahabzadeh - Barclays Capital
Jason Gere - RBC Capital Markets
Connie Maneaty - BMO Capital
Jim Barrett - C.L. King & Associates
Jon Andersen - William Blair
Previous Statements by SMG
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Thank you. Jim King, you may begin your conference.
Thanks, Amber. Good morning, everyone, and welcome to our first quarter conference call. I am joined here in Ohio this morning by Jim Hagedorn, our Chairman and CEO; Dave Evans, our CFO, as well as Barry Sanders, our President and Chief Operating Officer.
In a few moments, Jim and Dave will share some prepared remarks, and then Jim, Dave, and Barry, will be available to answer your questions. In the interest of time we request you ask one question and then one follow-up, so that we can move quickly through the queue.
And I will share with you in advance that our comments this morning will be pretty much contained through our Q1 results, because our Analyst Day is only a week away, we will wait until then to provide more detail on our full year outlook and business plans.
Speaking of our Analyst Day, if you have not registered yet, we would encourage you to do so. Our meeting will be held next Tuesday, February 14th, at the Waldorf Astoria in New York. Our presentations will start at 9:00 A.M and will continue shortly past noon. At that point our management team will host a lunch-in and we will close the day with an extended Q&A session.
We are already very close to full capacity at this time, so if you have not registered, we would ask you to do so, by the end of the day, Thursday, you can do so one or two ways. You can call my line directly at 937-578-5622 or you can send us an email at firstname.lastname@example.org. If you can’t attend the event in person, you can listen, and follow the slides of your webcast. The webcast would be available on our IR site, investor.scotts.com. If you subscribe to services from Thomson Financial, you can also listen to the webcast from your streetevent site. It also will be available on Thomson’s resale networks, which includes Yahoo Finance, Google Finance, and MarketWatch.
With that, let’s move to the business in hand, our Q1 results. I want to remind everyone that our comments today will contain forward-looking statements. And as such, we recognize that our actual results could differ materially from what we discussed here today. We encourage investors to read the complete set of Risk Factors that are outlined in our Form 10-K, which is filed with the Securities and Exchange Commission.
I also want to remind you that we will provide a reconciliation on our website, of any comments we make this morning related to non-GAAP financial measures that are not already discussed in today’s press release.
With that, let me turn the call over to our Chairman and CEO, Jim Hagedorn.
Thanks, Jim. Good morning everyone. I’m going to keep my comments brief this morning for two reasons. First, Q1 represents less than 10% of our year, and we’ve already communicated the results we expected in the quarter, so there is not much new news in today’s release. And second, as Jim just mentioned, we have our Analyst Day, just a week from today in New York. I would rather wait until then to elaborate on how our plans are coming together and what it all means for the full year.
But I will tell you we are operating the business hard right now in anticipation of a strong season. Our supply chain team is working non-stop on building product and getting it to the right place. Our sales teams is spending a lot of time in the stores working with our retail partners and getting displays up, and our marketing team is in the midst of launching one advertizing campaign and finalizing another.
So while we are still a few weeks away from the peak of the season you would never know from walking around the halls here we are going at full throttle.
As it relates to our Q1 results, I will tell you that I’m pleased with what we saw. The numbers came in just a bit better than we expected. On the top line you will notice that the global consumer segment was down 21% from last year. So let me provide some color.
You all remember that our fall business last year was pretty weak. Hurricanes in September and snowstorms in October really shut down consumer activity. So there wasn’t a lot of replacement happening in the early part of the quarter. In addition to that, our retail partners worked to end their fiscal years clean from an inventory perspective. The combination of all that played itself out in the results we are reporting this morning.
The other thing to keep in mind is while the percentage decline looks substantial, the dollar decline of roughly $40 million is not. To put that number in perspective, it would represent a single strong day of shipments during the peak of the season. So we see this as nothing more than a timing ship and not something that causes concern.
While it is not reflected in our Q1 results, we are seeing this very strong start to the current lawn and garden season, which in the south really starts with the calendar year. Since January 1, we are seeing some really positive trends in early breaking warm weather markets. Consumer purchases of our products at our major retailers were up more than 20% during that time driven by strong starts both in Florida and Texas. By the way, POS was up 20% December as well.