Gardening giant Scotts Miracle-Gro Company ( SMG ) shares are trading lower on Wednesday.

The company reported a first-quarter adjusted loss per share of 89 cents, which is narrower than the street view of a $1.23 loss. Quarterly revenues of $416.80 million outpaced the analyst consensus estimate of $392.34 million.

U.S. Consumer net sales increased 11% to $340.9 million, driven by a strong fall season across all categories and early retailer load-in for the spring season.

Hawthorne segment sales decreased 35% to $52.1 million due to Hawthorne’s strategic exit from third-party distribution as of April 1, 2024.

Also Read: Danaher Q4: EPS Miss Expectations Amid Diagnostics Segment Lag

“The year-over-year improvement in both shipments and POS is the result of strong retailer optimism for the upcoming lawn and garden season coupled with exceptional consumer engagement through the fall,” said Jim Hagedorn, chairman and CEO.

Adjusted gross margin rates for the quarter were 24%, compared to 13.7% in the prior year. The improvements were primarily attributable to lower material costs, favorable fixed-cost leverage, lower distribution costs following fiscal 2024 warehouse closures, and improved product mix related to Hawthorne’s transition from selling third-party products.

Adjusted EBITDA for the quarter was $3.8 million compared to a loss of $25.8 million a year ago, thanks to the significant margin recovery in both major business segments.

The company exited the quarter with cash and equivalents worth $9.8 million and inventories worth $909.8 million. Scotts Miracle-Gro’s long-term debt as of quarter-end totaled $2.636 billion.

“Year-over-year improvements in gross margin and lower debt levels show we have made meaningful progress in strengthening the balance sheet and are on a path to reach our full-year net debt to adjusted EBITDA goal,” said Mark Scheiwer, interim chief financial officer and chief accounting officer. 

Outlook: For FY25, the company continues to expect U.S. Consumer net sales to grow low single digits (excluding non-repeat sales for AeroGarden and bulk raw material sales) and Hawthorne net sales to decrease mid-single digits. The company sees adjusted EBITDA of $570 million to $590 million.

Price Action: SMG shares are trading lower by 2.50% to $73.84 at last check Wednesday.

Read Next:

Jim Cramer Recommends Buying ‘Fabulous’ BlackRock, Calls Coterra Energy The ‘Cheapest’ Natural Gas Company

Image via Shutterstock.