Scott’s Miracle-Gro (NYSE: SMG) has pre-released partial results for Q2 2020, ahead of the full report which will be released on May 6.
Scott’s Miracle-Gro expects an increase in company-wide sales of approximately 16 to 17 percent compared with the same period a year ago.
Sales in the U.S. Consumer segment are expected to increase approximately 12 percent for the quarter.
Hawthorne sales are expected to increase at least 55 percent for the quarter.
With all the chaos that’s going on right now, it seems that SMG is faring incredibly well through all of this.
Why Is SMG Outperforming?
Taking a look at the stock price of SMG, we can see that it has outperformed the S&P500 throughout this recent financial crisis.
SMG Stock Price vs S&P 500
Source: Ycharts
With this latest preliminary report, it appears that consumers are buying more of SMG’s products as they turn to growing their own supply at home while under quarantine.
A spike in legal sales may also be driving demand from licensed growers who simply need more dirt, fertilizer and other assorted equipment.
SMG’s management did not state exactly what drove the increase in sales, but analysts have speculated as to why.
Whatever the cause, the company has stated that it has experienced an increase in demand across the board with Hawthorne Gardening, the division that is responsible for manufacturing cannabis growing equipment, experiencing a 55% increase in sales.
More Good News For SMG Despite the Chaos
Part of SMG’s strong showing this quarter is also due to the company being relatively well prepared for a crisis like this.
Management has stated that a plan for a pandemic-like disaster has existed in the company for “nearly a decade”, and that the company started to prepare for the impacts of COVID-19 as far back as January when the reports of the outbreak from China were first rolling in.
What’s more impressive is that since SMG’s services have been designated as essential, its facilities continue to remain open and productive.
The company stated that “there have been no significant disruptions thus far of incoming supplies and raw materials nor a delay in shipments to retailers and other customers.”
Furthermore, according to SMG, all of the Company’s major retail partners also have been designated as essential services and remain open.
What About GrowGeneration (GRWG)?
This positive sign for SMG could also turn out to be good news for GrowGeneration Corp (NASDAQ:GRWG), which competes with SMG’s Hawthorne Gardening for making supplies to grown cannabis.
An increase for demand for Hawthorne is usually a good sign for GRWG as well, since so far the cannabis equipment industry has proven to be far from a zero-sum game with both Hawthorne and GRWG posting incredible growth, as evidenced in our detailed deep dive report on these two stocks.
GRWG has outperformed both SMG and the S&P500 since the whole outbreak started, even generating a positive return on stock price since January.
YTD Stock Price Return
Source: Ycharts
Taking a look at the balance sheet of GRWG, it is very strong for a company of their size, coming in with more cash than total debts and a current ratio above 4.
source: Yahoo! Finance
We will get more details as to GRWG’s recent performance when they release their earnings report this upcoming Monday, March 30, 2020.
However, it is looking like it will indeed be a strong quarter for them as well judging by SMG’s results.
We will be closely monitoring the performance of both companies and the general situation revolving around the Coronavirus’ impact, so stay tuned for more content.
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