uploads///SMGs Margins in Q versus Q

Scotts Miracle-Gro’s Margins Are Expanding

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Aug. 10 2017, Updated 9:38 a.m. ET

Scotts Miracle-Gro’s margins

During 3Q17, Scotts Miracle-Gro’s (SMG) margins saw some expansion YoY (year-over-year). The company’s sales growth of 8% helped the margin expansion, which trickled down to the bottom line.

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Margin expansion

During 3Q17, Scotts Miracle-Gro’s gross margins expanded from 36% in 3Q16 to 38.5%. The company’s gross income grew as much as 16.2% YoY, which was boosted by lower growth in the cost of sales YoY.

The operating margins also expanded slightly from 21.8% in 3Q16 to 22.8% in 3Q17. During 3Q17, the operating income rose 13.2% to $245 million. Compared to 16.2% growth in the gross income, higher operating costs had a negative impact on the company’s margins during the quarter.

The net income, excluding income from discontinued operations, rose 19.6% YoY to $151.9 million. The net margins grew from 12.8% in 3Q16 to 14.1% in 3Q17.

Notes from the earnings call

During the earnings call, management stated that its operating margins will improve as much as 4% in two years following the sale of its international business. On the other hand, the company stated that its margins from acquisitions had 20% in operating margins but there’s more room for improvement.

Margin expansion through acquisitions is common in the industry (PAGG). It applies to players such as Central Garden & Pet Company (CENT), Spectrum Brands Holdings (SPB), and HRG Group (HRG) as well.

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