Scotts warns of sales reduction in cannabis grow-supply segment

Scotts Miracle-Gro issued a new sales reduction estimate for its indoor cannabis cultivation supply segment, the Hawthorne Gardening Co., blaming “an oversupply” of the plant.

In February, Scotts warned that Hawthorne’s first-quarter sales were expected to decline by roughly 40% because of “a slowdown in the cannabis market as well as supply chain disruptions,” despite its recent acquisitions of Luxx Lighting and True Liberty Bags.

However, in a Tuesday news release, Scotts Chief Financial Officer Cory Miller called for a 15%-20% sales decline, including acquisitions.

“Sales in the segment have been challenged for several months due to an oversupply of cannabis, which is leading to a slowdown in both indoor and outdoor cultivation,” Scotts noted in its latest release.

The release did not specify a timeline for the anticipated 15%-25% sales decline.

Miller said an expected “seasonal element to the business … has not materialized to the extent we anticipated.”

“While sales volume has begun to improve recently, the year-over-year rate of decline has expanded and that trend appears likely to carry through March,” Miller said at an institutional investors conference, according to the release.

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Miller also said that Scotts “no longer expects a significant acquisition in fiscal 2022 to bolster its presence in the live goods category.”

Scotts said it would update its sales estimates again when it releases quarterly results in early May.