The Scotts Miracle-Gro Company (NYSE:SMG) Q1 2023 Earnings Call Transcript

Jim Hagedorn: No. I wouldn’t say it’s the same. I think we have been — and listen, we run our own business and so I am not blaming anybody acting like a victim. So don’t misread what I am saying. But we kind of paid for that business. We still believe in the growth of the cannabis sector. It is a bloodbath out there. I don’t know that was Forbes or Fortune like two years or three years that it’s going to be a bloodbath. Well, it has been. But we are invested there and we look pretty carefully at our business. And Garth coming in with Mike and Chris and myself and sort of saying, who do we want to be? I mean this gets down to the sort of pillars. And I think there was a group of people in here who said, we should just be the best little Scotts company we can be and it’s a kind of low single-digit growth rate and I — this is not chasing the value of the equity, but it basically says.

What we get from direct-to-consumer, what we get from live goods, what we get from Hawthorne is growth. And we got on the wrong side of that. We paid for that. We have taken the pain for it. And the question is, do we just throw — set it on fire? I had a situation with Smith & Hawken, where during the economic crisis in 2008, we bought that. I think we had thought we had a deal with Home Depot. It didn’t come together in a kind of weird screwed up way with Nardelli. But Dave was the CFO back then, and he said, look, we don’t have a forecast for profitability here, Jim, and nobody is putting it together and everybody is contributing. And Smith & Hawken, you need to make a decision on Smith & Hawken. He put it directly on me and I sort of — I — we burnt that thing.

We auctioned off the pieces and it was a pretty bad experience. I regret it today. Smith & Hawken or Hawthorne is not in that same situation. If you could say roughly that half of the profit of Smith & Hawken or Hawthorne is we burn by setting up a supply chain that was just bigger than clearly we need right now. That is worth. I am going to call it north of $50 million. So I think this business can get back to pretty easily kind of a 10% EBITDA margin and that’s kind of my view of opening stakes to sort of be a contributor here. And I think we get there and I think a lot of this happens, because we resized that supply chain. It’s hard and you think because there’s a lot of inventory there and we have got to work through it and we will. But I think we believe that there’s growth in that business that it’s about a screwed up that you can get.