Jan 10, 2022
Hawthorne Gardening Portfolio Expands with Luxx Lighting, True Liberty Bags

The Scotts Miracle-Gro Company has acquired Luxx Lighting in a transaction that significantly strengthens The Hawthorne Gardening Company’s lighting portfolio. The company also said it has acquired True Liberty Bags, a provider of liners and storage solutions to dry and cure plant products.

“These strategic acquisitions reinforce our commitment to provide commercial cannabis cultivators in state-authorized markets with a complete set of solutions driven by insight and innovation,” said Chris Hagedorn, division president of Hawthorne. “While the cannabis market continues to see near-term challenges from an over-production in recent months, we see the current reality as an opportunity to further distance ourselves from the competition and strengthen our business for long-term success.

“The True Liberty transaction gives us our first offering in this niche market, however, the acquisition of Luxx bolsters a lighting portfolio that is now several times larger and more diverse than our nearest competitor. Luxx has deep roots in the cannabis industry with lights that were designed, tested and refined in collaboration with the team at Jungle Boys, a company run by a group of some of the best cannabis cultivators in the world. We look forward to an ongoing relationship with Jungle Boys to support the sales and marketing efforts of the Luxx brand.”

Luxx joins a product lineup that also includes the Gavita and Sun System brands and provides the opportunity for significant cost synergies and process improvements across the portfolio that will be disclosed in greater detail in the weeks ahead, Hagedorn said.

ScottsMiracle-Gro acquired the assets of Luxx for $215 million. Hawthorne, which previously did not distribute Luxx, will expand the marketing and distribution of the brand in emerging markets, including the East Coast. The acquisition, which closed December 30, 2021, adds approximately $100 million in sales and $20 million in operating income to Hawthorne on an annualized basis. While approximately $75 million of revenue from Luxx is expected in the remainder of fiscal 2022, the transaction is expected to be neutral to earnings for the year due to the impact of purchase accounting and one-time deal costs.

True Liberty, which was acquired for $10 million, introduced storage solutions directly to the hydroponic market, developing a full offering of liners and storage solutions to dry and cure plant products. Hawthorne has been the primary U.S. provider of True Liberty brands, which expands Hawthorne’s harvest portfolio.

These deals follow the August 2021 acquisitions of HydroLogic Purification Systems, which moved Hawthorne into the water reclamation and purification category, and Rhizoflora, whose industry-leading Terpinator and Purpinator brands expanded Hawthorne’s nutrient offering.

Separately, ScottsMiracle-Gro said it is maintaining its full-year company-wide outlook for adjusted earnings per share despite a greater-than-expected decline in Hawthorne sales for the fiscal first quarter, which ended Jan. 1. First-quarter sales in Hawthorne are expected to decline approximately 40 percent caused by a slowdown in the cannabis market as well as supply chain disruptions that have delayed the sale of certain product lines.

“We are optimistic the supply chain disruptions we’ve experienced will be corrected by the end of January and we’ll be able to meet the continued demand we’re seeing for our industry-leading signature products,” said Cory Miller, chief financial officer. “We’re also encouraged by the year-over-year increase we’ve been experiencing in pre-orders for growing media products for delivery to commercial growers in the second and third quarters. However, the decline we’ve seen in the first quarter, against a 71 percent growth comparison a year ago, is greater than we had anticipated. Based on our current view of the market, we are lowering our full-year sales guidance for Hawthorne to a range of 0 to minus 10 percent on a year-over-year basis, including the expected benefit from Luxx. This range assumes a return to growth during the second half of the year.”

The company said its U.S. Consumer segment continues to perform well with POS growth in both dollars and units in every major product category and continued support in all retail channels.

“Consumer purchases, in units, were up 3 percent in the quarter against a 40 percent growth comparison a year earlier, and POS dollars increased 9 percent in the quarter,” Miller said. “Retail inventory levels are appropriate for this time of the year, and we remain optimistic about the potential for the segment as we prepare for the upcoming lawn and garden season.”

U.S. Consumer segment sales in the first quarter are expected to decline less than 20 percent, which is better than the company originally anticipated.

“While it’s too early to raise our guidance for this segment, the current trends and our continued optimism about the upcoming season, coupled with a focus on expense control in both Hawthorne and U.S. Consumer, allow us to maintain our guidance for adjusted earnings in a range of $8.50 to $8.90 per share,” Miller said.

The Scotts Miracle-Gro Company currently expects to issue complete first-quarter results on Feb. 1, 2022.


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