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

Executive summary

• Achieved 5% net sales growth in Q2 2026 to $1.46 billion, with significant gross margin improvement and leverage dropping to 3.71x, the first time below 4x in four years.

• EPS and adjusted EPS grew year-over-year, with GAAP net income per share at $4.46 and non-GAAP adjusted at $4.53, driven by strong branded product and e-commerce performance.

• Completed Hawthorne divestiture, now classified as a discontinued operation, resulting in significant losses and pre-tax charges.

• Initiated a multi-year share repurchase program, targeting at least one-third of outstanding shares, and launched SMG 2.0 aiming for $1 billion incremental sales by 2030.

• 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% to $1.81 billion year-over-year.

• 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, up nearly $38 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.

• Interest expense declined to $31.3 million in Q2, down 14.5% year-over-year.

Outlook and guidance

• Fiscal 2026 guidance reaffirmed: U.S. Consumer net sales expected to grow low single digits, gross margin rate projected at least 32%, and leverage ratio targeted in the high 3s.

• Adjusted EPS from continuing operations forecasted at $4.15 to $4.35 per share; adjusted EBITDA anticipated to grow mid-single digits.

• Free cash flow target set at $275 million for fiscal 2026.

• 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 and macroeconomic factors.