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Tuesday,
May 12, 2009
(Cont'd from
above)...
Jim (cont'd):
Jim:
Mr. Hagedorn,
welcome to Mad
Money...
James:
It's
gardening time...
Jim:
Alright, let's
get right to it...
The call was bullish
in tone. The
analysts did not
like it. Well, they
all... they trimmed
estimates... that's
my way of describing
that they didn't
like it. Was the
trimming of the
estimates implied in
the call, because I
didn't hear it?...
James:
I think that
they were expecting
us to be calling the
number up, out of
the range...
Jim:
Guiding up?...
James:
Yeah, but
it's just too early
in the season for us
to do that... The
business is going
great... the
consumer business is
on fire... both here
and in Europe... and
everything else is
under control... so
the business is
really good...
consumers are going
like crazy... the
retailers are using
our brands to bring
people into the
stores, so business
is good, but we're
just not ready to
call the numbers
up...
Jim:
Okay... When I
watch TV, and I
watch a lot of
sports, I see Lowe's
ads... you know,
that's a big
customer of yours...
and I see them
advertising Miracle
Gro... Now, I don't
want to
oversimplify,
because I know that,
to pick a stock, is
more than just
looking at an ad...
But it does seem
like, at least in
Lowe's case, they
are saying, come
garden, and it's
Scotts Miracle Gro...
That clearly has to
benefit a company
like Scotts, doesn't
it?...
James:
You know, our
business is, sort
of, doing record
sales right now...
POS... our sales for
May... to two
retailers, our
shipments for May
are probably up
45%...
Jim:
That's
unbelievable!...
James:
POS (i.e.,
point-of-sales),
last weekend, was up
over 25%, year on
year... That's the
biggest weekend of
the year... and the
retailers are using
our brands to bring
people in...
because, if they're
not buying cabinetry
and appliances, they
can come in and, for
like 10 bucks, they
can beautify their
garden and their
yard...
Jim:
I think the
market makes
mistakes
periodically... I
think this is one.
Now, people say...
now, wait a
second... they put
in a price increase,
and the Dole and
Chiquita... this is
the professional
side... bought ahead
of the price
increase, and are
now waiting for
prices to come down.
Now, given what you
just told me, I
don't know why I
should presume that
they're going to be
right in waiting for
prices to come
down...
James:
Prices are
coming down on the
Pro side...
Jim:
So maybe
they're right to
hold back?...
James:
Yeah, but
over the period of a
year, I think
that... we run our
professional
business from
Holland... and so
our international
business... the
consumer business
will be ahead... the
Pro side will a
little behind...
But, at the end of
the year, that
business will be on
their budget...
Jim:
Okay, but it's
important to point
out that the
professional
business... if I
spent this whole
segment talking
about that... that
would be a grave
misunderstanding of
how much their
business is to
you...
James:
No, the core
of our business...
let's call it $250
million... The core
of our business -
the $2.5 billion of
it - is consumer.
Jim:
Okay, good.
Now, the dollar's
been weak of late.
The analysts are all
saying that, because
of the weak dollar,
things aren't
working in
international... I
presume that, when
the dollar's...
James:
It doesn't
mean that it's not
working
international... it
just means that the
profit from
international is
probably costing us
5%...
Jim:
The
translation... Okay,
but that can change
as the dollar gets
weak...
James:
The
businesses are
strong, okay... The
consumer business in
the U.K.... the
consumer business...
up like 40%... like
10% in France, up
30% in Germany...
and our U.S.
business is up
like... point of
sale, like 15%...
Jim:
Are people
worried you might do
an equity offering,
because you've been
deleveraging your
balance sheet,
because I don't
think you need to do
one...
James:
We'd like to
delever our balance
sheet. You know,
we're about four
times right now, and
we'd like to get
that down lower...
Jim:
You can do that
with cash flow...
James:
No, we have
excellent cash flow,
so we're looking
this year at like
$170 million of free
cash, so we delever
pretty quickly over
time...
Jim:
Yeah, that's
terrific.
James:
Now, another
thing that they talk
about... now maybe
that's because I
just spent $900 on
my outdoor
furniture, therefore
helping your bottom
line, is that
they're all worried
about Smith and
Hawkin, which I
think is a great
brand name, and
makes high-quality
products... but
they're saying this
is not helping you.
Smith and Hawkin is
a pretty good brand,
isn't it?
James:
It is a good
brand, and it is
definitely not
helping us. $5000
teak furniture sets,
right... in this
market...
Jim:
That's why you
knocked off a couple
of dollars... you
thought I paid full
price... is that
what you're
thinking?...
James:
We're talking
10-20 cents a share
is what Smith and
Hawkin is costing
us... We're looking
at our alternatives
for it... It's not
acceptable, that
kind of loss...
Jim:
So you're
looking at it... and
you're addressing
it... you're not
just saying you're
just going to ride
it out...
James:
No, no...
we're going to deal
with it. But the
brand is a really
good brand...
Jim:
Right!
James:
... and I
think we've got
ideas for how to use
the brand.
Jim:
Is it the
stores? Because I
know... like, I was
in the store in
Georgetown this
weekend... You know,
it's a little off
the main drag from
M... and I was
thinking, you know,
the store was not
crowded...
James:
...sales are
getting better and
better... This
month, POS is up...
almost all the
stores are positive
comp (compared to
last year)... for
the month... so the
stores... almost all
the stores are
profitable. It's
basically... they're
just not big
enough... call it
less than 60
stores...
Jim:
Right...
James:
When you've
got a headquarters
unit... by the time
you're done adding,
it's a negative
number...
Jim:
But, I mean,
look, if we had to
be drastic, and
close the stores,
the stock would go
higher...
James:
Yes, sir...
Jim:
Alright, well
look... I think the
market's wrong...
You only further my
belief that the
market's wrong...
particularly because
of the new data
you've given us
today...
▼ ▼
▼ ▼
▼
 The
Bottom Line!:
Jim Hagedorn from
Scotts...
Scotts Miracle-Gro Co. (SMG)...
Let's not fool
around... This
stock, I think, is
going much higher.
[verbatim recap]
[end of segment]
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