Scotts Miracle-Gro (SMG) primarily sells its products in North American and European Union markets. On April 13, 2016, the company reclassified its operating segments as US Consumer, Europe Consumer, and Other. In 1Q17, the US Consumer segment contributed 51% to the company’s total sales, the Europe Consumer segment contributed 10%, while the Other segment contributed the remaining 39% towards the company’s total sales for the quarter. Let’s see how each of these segments performed in 1Q17.
For 1Q17, SMG’s overall sales grew an impressive 27% year-over-year to $246.8 million. The company’s largest sales growth in 1Q17 was observed in the other segment, which grew 74% to $96.9 million year-over-year from $55.6 million in 1Q16. The US Consumer segment grew 11% to $125.5 million year-over-year from $113.2 million in 1Q16. In contrast to these two segments, the Europe Consumer segment experienced a 5% decline in sales to $24.4 million year-over-year from $25.7 million.
Most of Scotts Miracle-Gro’s sales occur in the second and the third quarter as we see in the chart above. This is primarily because of the seasonal nature of the lawn and garden business (SOIL). Companies such as Spectrum Brands (SPB), Central Garden & Pet (CENT), and Agrium (AGU) are a few more examples of companies impacted by seasonality in business.
What drove the company’s sales growth?
In its press release, the management stated that the recent acquisitions and a “strong consumer demand in the US” drove earnings. The company’s recent list of acquisitions includes Hawthrone Gardening, Gavita, and Botanicare. Sales from these companies are included in the Other segment, which, as we saw above, rose 74% year-over-year.
The growth in sales also helped in the expansion of the company’s gross margins, which we’ll discuss in more detail next.