The Scotts Miracle-Gro (SMG) Q2 2026 earnings summary

Executive summary

• Achieved leverage of 3.71x debt to EBITDA, first time below 4x in four years, with Q2 2026 net sales of $1.46 billion, up 5% year-over-year, and completed Hawthorne divestiture.

• Free cash flow, EBITDA, and EPS exceeded expectations in the first half of fiscal 2026, with adjusted EBITDA at $437.4 million and adjusted diluted EPS at $4.53.

• Initiating a multi-year share repurchase program, aiming to buy back at least a third of outstanding shares.

• Launched SMG 2.0, targeting $1 billion incremental sales by 2030, gross margin near 40%, and EBITDA over $1 billion.

• Hired a new Chief Brand Officer and expanded executive roles to drive innovation and growth.

Financial highlights

• Q2 net sales increased 5% to $1.46 billion; first six months net sales up 3% year-over-year.

• Branded product sales up 8% in the first half, offsetting declines in mulch and non-branded products.

• E-commerce POS dollars up 22% year-to-date, with growth in every category and customer.

• GAAP gross margin rate for Q2 was 41.8%, up 280 basis points; adjusted gross margin up 240 basis points year-over-year.

• Q2 adjusted EBITDA was $437.4 million, up from $401.6 million last year; year-to-date adjusted EBITDA $440.2 million.

• Q2 GAAP net income from continuing operations was $263.3 million ($4.46/share), up from $220.7 million ($3.78/share) last year; adjusted diluted EPS at $4.53.

• Year-to-date free cash flow improved by over $100 million; fiscal 2026 free cash flow guidance set at $275 million.

Outlook and guidance

• Reaffirmed fiscal 2026 guidance for net sales growth, gross margin expansion, and leverage reduction; U.S. Consumer net sales expected to grow low single digits.

• Adjusted gross margin rate projected at least 32%; adjusted EPS from continuing operations expected between $4.15 and $4.35.

• Adjusted EBITDA anticipated to grow mid-single digits; free cash flow target set at $275 million; leverage ratio expected in the high 3s.

• Most commodity costs for the year are locked; contingency plans in place for supply chain risks.

• Fiscal 2027 outlook remains uncertain due to commodity volatility from the Iran conflict; pricing actions will be used if necessary.