The Scotts Miracle-Gro Company (SMG) 46th Annual William Blair Growth Stock Conference summary

Strategic transformation, positioning, and consumer trends

• Significant transformation and exit from cannabis/Hawthorne business sharpened focus on core lawn and garden, targeting sustainable sales growth, margin expansion, and a stronger balance sheet.

• Over 50% of American households participate in lawn and garden care, with Millennials and Gen Z increasing spend and engagement, motivated by mental wellness and food growing.

• Brand portfolio holds #1 positions in multiple categories, distributed through premier retail partners in an $11B market.

• E-commerce and new channels are prioritized, with double-digit growth in emerging retailers and online sales, while traditional brick-and-mortar growth slows.

• SKU rationalization underway, aiming for a 30% reduction to streamline offerings and make room for innovation; two-thirds complete, with over 80 new SKUs introduced this year.

Innovation, partnerships, and operational excellence

• Product innovation emphasizes safety, efficacy, sustainability, and consumer experience, including new biologicals, naturals, recyclable packaging, and user-friendly features.

• Indoor gardening and new pest control products have driven over $80 million in sales YTD, with expansion into categories like tick and ant control.

• Channel expansion includes targeting small and medium-sized professional landscapers, independent garden centers, and increased ecommerce penetration.

• Strategic partnerships and selective M&A, such as with Bonnie Plants and Black Kow, fill portfolio gaps and extend reach in adjacent categories.

• Technology and AI investments, including an AI center of excellence with 40+ use cases, are embedded across supply chain, R&D, marketing, and customer service to drive efficiency and topline growth.

Financial performance, objectives, and outlook

• Fiscal 2026 targets include low single-digit (3%) annual sales growth, at least 32% adjusted gross margin, and $275M in free cash flow.

• $150M in supply chain cost savings targeted over three years, with $100M delivered and 2/3 achieved by FY25.

• EPS growth projected at 10%-12% for the year, with adjusted EPS guidance for FY26 at $4.15 to $4.35 per share and mid single-digit adjusted EBITDA growth.

• Financial leverage reduced below 4x for the first time in four years, with a path to maintain leverage in the 3x range and begin share repurchases by year-end FY26.

• Strategic focus through FY27 includes sustainable net sales growth, lowest-cost manufacturing, margin expansion to pre-COVID levels, and balanced capital allocation.