Scotts Miracle-Gro is 'recession-resistant,' CEO explains

Scotts Miracle-Gro Company (SMG) reported fourth quarter earnings on Wednesday, showing a decrease in net sales but an overall narrow loss.

Scotts Miracle-Gro Company CEO and chairman, Jim Hagedorn, joins Market Domination host Josh Lipton to explain how the lawn and garden industry is "recession-resistant" and how the company is leveraging artificial intelligence (AI).

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Video Transcript

00:00 Speaker A

So, it's a good story, but you mentioned, listen, it's popping today, as you said, from depressed levels. The stock's down about 20% year to date. Let me ask you, is there just a part of the story, Jim, that you think, okay, investors maybe failed to appreciate or misunderstand? What is that?

00:15 Jim

Yes. Yes. That we lawn and Garden is a recession resistant category. It is on fire right now. I mean

00:27 Speaker A

Why is it recession resistant? That's interesting.

00:29 Jim

If you look and say, when consumers are getting all edgy and like everything's too expensive and do I have enough money, am I going to stay employed? What do they do? Lawn and garden and paint. Those are the categories in do it yourself that do really well during recession. So, um, you know, I think if you look at DIY retail right now, I think they're struggling with footsteps in the store, not lawn and garden. Lawn and garden, you know,

01:06 Jim

we are the biggest vendor in like DOI Home centers from the period called March to probably the end of June, till 4th of July. We're we are the biggest vendor in the entire chain. You know, um, it this is crazy money and we've got great brands. And so I I think what's happening is, um, what what's under appreciated with us? That we have this great consumer franchise that's recession resistant, that's doing really well now.

01:42 Jim

Um, and I think we're trading, I mean, look, if you look at our multiple, our historic multiple, call it 17 times, you know, PE, um, we're probably down like 12 or something like that right now. Um, if you look at consumer goods in general, I think that's what's happening. But I think you're what you don't see in other consumer companies is the sort of brand power and and sort of consumers buying their stuff. People are worried about tariffs, they're, you know, if you just look at a lot of the the food companies, a lot of the other consumer brand companies that are struggling, we don't have any of those issues. So I think we are such an undervalued company for such a really great, very dominant consumer brand in a great category.

02:08 Speaker A

How how would you, Jim? Listen, we're always looking for lines of sight into the consumer and maybe now more than ever because we don't have all the government data we would like. So even more than ever before, I think investors look to a CEO like you. What do you see with the consumer? How how healthy? How resilient?

02:27 Jim

Remember, our people are homeowners. So, these are not the bottom of the economic totem pole. These are people who live in really suburban homes and they are not suffering. They have jobs. They are interested in sort of inexpensive home projects. There's a lot of psychic benefit for gardening. Like, the young woman who was the producer that had us last time we're on your show, Taylor, she's off on like maternity leave right now. Right? Like she said, I just, I don't have my lawn's all messed up. Could you help me? The producer that just brought us in here. What what do they? two kids, they move out to Westchester, they want a home, they want a garden, they want a yard.

03:22 Speaker A

Did you have advice, Jim? Were you able to give some tips and tricks?

03:24 Jim

Yeah, we sent Taylor all kinds of stuff. We I sent her a note yesterday saying, dude, how by the way, how was your? She said, the lawn was great, but we sold that house and we bought another house. Um so, no, she the biggest thing with her is get her on a four-step program where she's applying regularly lawn fertilizer and she's got a great yard. It's so simple.

03:45 Speaker A

Let me here was another theme. We talk about AI a lot on the show, as you can imagine. I thought it was interesting, Jim, how you you did mention here, leveraging AI and robotic automation in the business. What what are some examples of that, Jim, and where's it shown up in the financials, operations margins?

04:02 Jim

Look, I think we're using AI in a lot of places in the business. I wouldn't say we're giant AI kings or queens.

04:09 Speaker A

The Nvidia of lawn care?

04:11 Jim

No, no. Like, look, I think we've got great data, but it helps us sort the data. For sure it's helped us. You know, we picked up 500 basis points of margin in a year. A lot of that is really getting inventories much better control over sort of all our costs at Scotts. Where it's really going to come is our knowledge of the consumer. That's where AI is going to really help us. I think it is, it's consumer insights and sorting data and really helping us make decisions. And then, you know, frankly try to make the company a little smaller, put more of our money against the things that drive business, which is activation dollars with retail and consumer.

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