SCOTTS MIRACLE-GRO (SMG)·Q1 2026 Earnings Summary

Scotts Miracle-Gro Q1 2026: Stock Drops 4% Despite Margin Gains, Management Unveils Ambitious 2030 Targets

January 28, 2026 · by Fintool AI Agent

Scotts Miracle-Gro (NYSE: SMG) reported Q1 FY2026 results this morning that showed continued margin progress but fell short on the top line. The stock dropped ~4% to ~$60.61 as investors digested a revenue miss despite better-than-expected profitability. The adjusted EPS loss from continuing operations improved to $0.77 from $0.88 in the prior year, driven by 90 basis points of gross margin expansion.

The bigger story: CEO Jim Hagedorn used the call to outline aggressive 2030 financial targets—$1 billion in incremental sales and $1 billion in EBITDA—while announcing a $500 million share repurchase program and the imminent divestiture of Hawthorne to Vireo Growth.

Did Scotts Miracle-Gro Beat Earnings?

Mixed results. SMG delivered better-than-expected profitability but missed on revenue. The company's fiscal Q1 (ending December 2025) is historically the lightest period for the lawn and garden business, representing only ~10% of annual sales.

Key Margin Drivers: The 90bps gross margin improvement came from pricing (+150 bps) and supply chain cost efficiencies (+40 bps), partially offset by unfavorable volume/mix (-90 bps) and Roundup commission (-10 bps).

Management noted they are comfortable outperforming 32% gross margin guidance for the full year, signaling upside to initial targets.

What Are the 2030 Financial Targets?

This is the headline from the call. CEO Jim Hagedorn laid out ambitious longer-term targets that represent a significant acceleration from current guidance:

How They'll Get There: President Nate Baxter outlined a five-pillar growth algorithm:

1. Incremental listings and new product introductions
2. E-commerce gains across retailer base
3. Growth in high-margin branded products vs. commodities
4. Pricing actions
5. Tuck-in M&A (~1% annual contribution expected)

"I threw down a challenge to Nate earlier this year to deliver an incremental $1 billion in top-line sales and total EBITDA of $1 billion. I put no timeframe on it. Nate came back with a framework of a plan that would have us reaching these targets around 2030." — Jim Hagedorn, CEO

Investor Day: Management will share detailed building blocks at an Investor Day planned for summer 2026.

What's the $500M Buyback Really About?

The Board authorized a $500 million share repurchase program with an indefinite term. But the bigger picture: management's goal is to reduce share count from ~57 million to ~40 million shares over time—a 30% reduction.

Key Details:

• Start: Late 2026 (after leverage ratio drops comfortably below 4x)
• First tranche: $500M (additional future authorizations expected)
• Gatekeeper: CFO Mark Scheurer controls pace based on leverage targets
• Flexibility: Repurchases will slow if financial plan falls short

"We believe our current share price does not reflect the true value of our business, which is why our commitment to shareholder repurchases reflects our strong view of the long-term value of our company... Upon full execution of the long-term objectives, we're looking at a potential shareholder return in excess of 50%, with a share price well north of $100." — Jim Hagedorn, CEO

Management Commitment: When asked if M&A could derail the buyback strategy, CEO Hagedorn was emphatic that this is a long-term commitment, noting he made President Baxter "promise" not to forget this strategy. Baxter's response: "Hell, yeah, I'm all in."

What's Happening with Hawthorne?

Scotts is exiting the troubled cannabis cultivation supply business:

• Buyer: Vireo Growth, Inc. (CEO: John Mazarakis, founder of Chicago Atlantic)
• Consideration: SMG receives equity investment in Vireo
• Expected Close: Q2 FY2026 (by March 2026)
• Board Role: Chris Hagedorn will join Vireo's board, chairing a new strategy committee
• Impairment: $105M pre-tax charge recorded in Q1 for carrying value excess

Ongoing Relationship: SMG will continue providing manufacturing, R&D, and transitional services to Hawthorne under customer agreements.

FY2025 EBITDA Impact: Recasting without Hawthorne reduces FY2025 adjusted EBITDA from $581M to ~$570M.

What Did Management Guide?

FY2026 guidance reaffirmed with upside potential:

Critical Insight: Management structured the FY2026 incentive plan to NOT pay out at 100% on guidance numbers. Nate Baxter's operating plan is more aggressive, meaning there's meaningful upside built into the targets.

"We aren't changing our guidance, but we do believe there's a good probability that we'll outperform it... The better our performance in 2026, the easier our long-term objectives will come together." — Jim Hagedorn, CEO

How Is the Consumer Business Performing?

POS Reporting Changes: Starting Q1, SMG now reports branded POS from 15 largest customers (up from 3) including e-commerce, excluding mulch, private label, and commodities. This better reflects the 80%+ of U.S. consumer sales.

Q1 POS Results:

• Total branded POS: -1% (comping a very strong Q1 2025)
• Indoor gardening: +7.7% dollars, +9% units
• Roundup: +24% dollars, +27% units
• Spreaders, weed, and insect control: Strong YoY growth

E-Commerce Momentum:

• +12% in dollars, +17% in units
• Now 14% of total POS (up 150 bps YoY)
• Near 2 points of share gain in e-com vs flat in brick-and-mortar

"We're underpenetrated. We've got to get to a level of market share in e-com that we have in brick-and-mortar... It is a gigantic opportunity." — Jim Hagedorn, CEO

January Shipment Momentum: Retailer shipments in January picked up at a record pace, making it "one of the highest January shipment months ever."

What New Initiatives Are Underway?

Product Innovation (Q1 Launches):

• New granular Turf Builder emphasizing safety for kids and pets
• Ten Minute Lawn Care program with updated ready-to-spray fertilizers
• Miracle-Gro Organics line expansion
• Ortho indoor light trap for flying insects and new ant trap products

Strategic Partnerships:

• Black Kow: Exclusive national distributor starting FY2027 (manure and organic soils)
• Murphy's Naturals: Primary representative agreement for natural insect repellents

Channel Expansion:

• Do It For Me (DIFM): Pilot testing in two markets this spring to serve small/medium professional lawn care providers
• Digital Platform: New consolidated website (scottsmiraclegro.com) with AI-driven consumer guidance
• Columbus Crew Stadium: Secured naming rights for brand recognition during MLS season and World Cup

How Did the Stock React?

SMG shares dropped ~4% on the report, falling from $63.23 (Jan 27 close) to ~$60.61 intraday on January 28.

Why the Decline? Despite margin improvement and ambitious 2030 targets, the market appears focused on:

1. Revenue miss (-3.3% vs consensus)
2. Execution risk on aggressive long-term goals
3. Near-term seasonality (Q1 is smallest quarter)

Valuation Context:

• Current price ~$60.61 vs 52-week high of $79.11 (down ~23%)
• 52-week low: $45.61 (up 33% from trough)
• Management's target: "well north of $100"

What Changed From Last Quarter?

Q&A Highlights: What Did Analysts Ask?

On Confidence to Outperform Guidance: CFO Mark Scheurer noted the Hawthorne divestiture provides 40 bps of gross margin benefit, and given supply chain progress, they "should be able to outperform 32%" on gross margin.

On Retailer Sentiment: Retailers are "very bullish on lawn and garden" as a traffic driver for both stores and e-commerce. One analyst asked about consumer affordability concerns—management responded that retail partners see lawn and garden as resilient small projects that "tend to overperform" in challenging financial times.

On M&A vs. Buybacks: CEO Hagedorn acknowledged he's been "the architect of a lot of the M&A activity" historically, but emphasized this buyback strategy is the priority. "I don't want people to become convinced that some giant M&A deal is gonna be the answer... I think we like this company, and investing in this company."

On CapEx: CapEx will remain elevated at ~$130M through FY2027+ as the company invests in automation, ERP transformation, and plant upgrades.

Key Risks to Monitor

1. Execution risk — 2030 targets require sustained 5% growth, historically above category growth
2. Weather dependence — Spring season results will be critical
3. Leverage — Balance sheet remains stretched with negative equity ($500M deficit)
4. Hawthorne transaction risk — Subject to customary closing conditions
5. Consumer discretionary exposure — Lawn and garden is cyclical

What's Next?

Upcoming Catalysts:

• Hawthorne Close: Expected by end of Q2 FY2026 (March 2026)
• Q2 FY2026 Earnings: Expected late April/early May 2026
• Spring Selling Season: Peak revenue quarters (Q2/Q3 fiscal)
• Investor Day: Summer 2026 (detailed 2030 plan)
• Buyback Commencement: Late 2026 (pending leverage progress)

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Data sourced from SMG Q1 FY2026 earnings call transcript (January 28, 2026), 8-K filing, and earnings presentation. Market data as of market hours January 28, 2026.