Speaker 1: Bloomberg Audio Studios, podcasts, radio news. So we want to
Speaker 1: take a look at gardening product maker Scott's Miracle Grow,
Speaker 1: unveiling new growth targets in its investor day today, fresh
Speaker 1: off the new CEO appointment. The company says the adjusted
Speaker 1: EPs and sales targets are part of a quote growth
Speaker 1: algorithm with lakes into twenty twenty nine, and to put
Speaker 1: a finer point on that, the company putting out those
Speaker 1: mid range financial targets for fiscal twenty twenty seven through
Speaker 1: fiscal twenty twenty nine average annual adjusted EPs growth of
Speaker 1: five to eight percent. Fresh off that investor day, right
Speaker 1: here in Studio two is the CEO and President of
Speaker 1: Scott's Miracle Grow, Nate Baxter. Great to see you, Nate.
Speaker 2: Thanks for having me.
Speaker 1: I know you're getting settled into the job. You had
Speaker 1: to come talk to the Wall Street wharredes. How did
Speaker 1: they treat you today?
Speaker 2: Everybody was great? Yeah. You know.
Speaker 3: The reality is I've been having conversations for the last
Speaker 3: eighteen months with our investors. So while the title has changed,
Speaker 3: the underlying strategy is still consistent with what I've been
Speaker 3: talking about for the better part of two years.
Speaker 1: Talk about the underlying strategy. When I see EPs growth
Speaker 1: a five to eight percent, that doesn't seem aggressive, but
Speaker 1: it's not necessarily low either. Are given all of the
Speaker 1: complexities going on in the world today, what gives you
Speaker 1: the confidence that you can meet that?
Speaker 3: Well, we do recognize it's sort of conservative. It's sort
Speaker 3: of in the sweet spot of a value investor. If
Speaker 3: I look at the last couple of years, we've had
Speaker 3: a lot of volatility in the markets, a lot of
Speaker 3: events between tariffs and the war in Iran that we
Speaker 3: just couldn't predict. So our point of view is we're
Speaker 3: going to be fairly conservative, but we are going to
Speaker 3: turn into a growth company. Have we believe that the
Speaker 3: underlying initiatives that we outline today are going to get
Speaker 3: us to where we need to be. But we also
Speaker 3: wanted to be honest with investors about growth. I told
Speaker 3: the team, I think we can outperform that, but our
Speaker 3: focus right now, especially from a capital allocation standpoint, is
Speaker 3: getting that leveraged down a little bit.
Speaker 1: So with regards to the growth strategy, and forget me,
Speaker 1: I don't mean to be flip about it, but when
Speaker 1: I think about the products, you see obviously iconic brand,
Speaker 1: the branded products. But that doesn't seem like a growth
Speaker 1: story unless I'm missing something.
Speaker 3: Well, I think you have to look at our a
Speaker 3: couple of ways. So we do believe there's a lot
Speaker 3: of organic growth possible. Our average house penetration is only
Speaker 3: about ten percent. So if you look at the eighty
Speaker 3: five million households out there only being penetrated by ten percent,
Speaker 3: we have a lot of organic opportunity. Now, the question
Speaker 3: is how do we convianse consumers to engage with us
Speaker 3: in our category.
Speaker 2: So I think that's one of the fundamentals.
Speaker 3: The others we know channels, consumers are shopping channels that
Speaker 3: they didn't before, you know, you come out of the pandemic.
Speaker 3: I think we had something like less than five percent
Speaker 3: of our total point of sale that was through e commerce.
Speaker 3: Now we're up to thirteen percent, three hundred BIPs alone
Speaker 3: this year. So what we're realizing is we need to
Speaker 3: go to where the consumer is, especially the younger consumer,
Speaker 3: and they're in totally different channels.
Speaker 1: Well, we'll talk to me a little bit about that,
Speaker 1: because what is sort of I mean, you talked about
Speaker 1: this at the investor, you talked about this on your
Speaker 1: earnings last week. I believe as well about digital advertising
Speaker 1: and your approach to it. What does this mean You're
Speaker 1: just making like, you know, funny things on TikTok or
Speaker 1: is it a little more sophisticated.
Speaker 3: Then no, I mean we certainly don't want to we
Speaker 3: don't want to cheap in the brands.
Speaker 2: It's more sophisticated than that.
Speaker 3: What we're recognizing is we need to meet the consumer
Speaker 3: where we are. You know, we used to be a
Speaker 3: traditional media company, buy those upfronts. You would have a
Speaker 3: fixed date, the cost was sunk, you would run it.
Speaker 3: The weather might not be great, not necessarily the right
Speaker 3: way to do your media strategy. So we've now pivoted
Speaker 3: where eighty percent of our media is digital, and it
Speaker 3: does two things that are really important. One is we
Speaker 3: get to tailor it for individual consumers, and the second
Speaker 3: thing is we get to be really agile with it.
Speaker 3: We can decide on a Monday, if the weather is
Speaker 3: not going to be good in Chicago this weekend, we
Speaker 3: can pull back or we can redirect it. So it
Speaker 3: allows us to be much more effective, and we've seen
Speaker 3: a commensurate increase in the media ROI as a result
Speaker 3: of that.
Speaker 1: Is your marketing primarily created in house or are you
Speaker 1: relying on third party?
Speaker 2: It's a hybrid. We have a for the social stuff.
Speaker 3: We'd like to do it in house because you need
Speaker 3: to be able to respond to what's happening out in
Speaker 3: the world. But we have a whole bunch of partner agencies.
Speaker 3: We don't do the traditional AOAR model. We actually pick
Speaker 3: a lot of partners and we let our people sort
Speaker 3: of direct. And it's been hit or miss. You know,
Speaker 3: We've got great agency partners. We have some that are
Speaker 3: good for a period of time and then we want
Speaker 3: to move on. But one thing, it's a little bit
Speaker 3: like AI. It's changing so quickly. We've got to be
Speaker 3: flexible with who we partner with on the initiatives.
Speaker 1: Now, talk to me about your input costs. I mean,
Speaker 1: we've seen commodity prices up, including for your REA. Obviously,
Speaker 1: it does not seem like there's going to be an
Speaker 1: end in sight right now for those to come down.
Speaker 1: With the guards and the situation in the Middle East
Speaker 1: as well as some of the other weather related factors.
Speaker 1: How have you factored that in too, that five to
Speaker 1: eight percent.
Speaker 3: So yeah, certainly, certainly been a challenge I mean, I
Speaker 3: think we talked about in our Q thre earning Q
Speaker 3: three earnings we had a little bit of a headwind
Speaker 3: this year. We absorbed most of it through costs out,
Speaker 3: but about fifteen million of it did follow the bottom
Speaker 3: line on.
Speaker 2: In Q three. For next year, we're doing a few things.
Speaker 3: One is, we've got a great team that does pretty
Speaker 3: sharp hedging and so we do he Juia diesel when
Speaker 3: it's available. But more importantly, we work on how to
Speaker 3: minimize those inputs. And we're also going to have to
Speaker 3: take some pricing this year, and that's a delicate balance.
Speaker 3: We've got to look at volume trade offs with that.
Speaker 3: But we have great relationships with our retail partners, and
Speaker 3: given we're in the mid single digit ranger pricing, we
Speaker 3: think we can figure out a way to navigate that.
Speaker 1: What's the relationship like with the retailers and where you
Speaker 1: put product versus what maybe you're trying to sell directly
Speaker 1: through your own channels.
Speaker 3: Well, let me be clear, we don't really endeavor to
Speaker 3: sell a lot directly through own channels. It's a pretty
Speaker 3: smart surrounding air for us, and it's not something we're
Speaker 3: focused on.
Speaker 2: Our lawns program.
Speaker 3: As the biggest, but our retail partners are pivoting very
Speaker 3: quickly to ECOMP. So if you look at the big three,
Speaker 3: which is what we've traditionally talked about, footsteps and those
Speaker 3: brick and mortar stores flat to down.
Speaker 2: Actually last quarter.
Speaker 3: They were slightly positive, which was a great sign to see,
Speaker 3: but they are pivoting quickly. So we are now in
Speaker 3: the mode of developing products for all of our eCOM
Speaker 3: consumers and retail partners. And that's a big part of
Speaker 3: what we've talked about today, which was innovation.
Speaker 1: I do just have to ask you, obviously, when I
Speaker 1: think of the products that you sell, it's Scott's miracle grow.
Speaker 2: I think you know you're a homeowner.
Speaker 1: You're going out into your backyard or into your front
Speaker 1: yard and applying and applying the products.
Speaker 2: Here.
Speaker 1: We know that the home ownership rate has gone down.
Speaker 1: We know the turnover of homes has gone down as well.
Speaker 1: I assume that has to have a direct impact in
Speaker 1: your business. How do you compensate for the slowness that
Speaker 1: we're seeing in that space.
Speaker 3: Well, the good news is all part of how we
Speaker 3: go capture that next generation, so that next generation they
Speaker 3: are not yet homeowners. They are apartment dwellers, they have condos.
Speaker 3: So we've pivoted hard into indoor gardening, something we've always
Speaker 3: done but we haven't talked about it, and we have
Speaker 3: a whole new suite of products that came out. The
Speaker 3: other big win that we talked about at investor Day
Speaker 3: today is in the grocery aisle. We typically have not
Speaker 3: been present in the grocery aisle with our Controls products,
Speaker 3: and so we now are winning business at some of
Speaker 3: our bigger partners in the grocery aisle.
Speaker 2: That's a big deal for us.
Speaker 3: And then if you look at our partnerships, we've talked
Speaker 3: about a partnership with a small company called Murphy's. They're
Speaker 3: doing on skin natural mosquito prevention and repellent. We're finding
Speaker 3: new channels with them. So I think you know this
Speaker 3: growth story. Just to go back to what you asked
Speaker 3: me a minute earlier, it's really about getting the right
Speaker 3: products in our consumer's hands. So we've got our traditional
Speaker 3: consumer that likes the traditional product that you just mentioned,
Speaker 3: but we have the next generation consumer. They want natural,
Speaker 3: they want organic, they want things that are safe for
Speaker 3: pets and kids. That includes apartment dwellers. That includes people
Speaker 3: that aren't yet homeowners. And when I look at the
Speaker 3: home ownership I don't look at it as a win today.
Speaker 3: I look at it as it's going to be a
Speaker 3: tailwind when that dam breaks, when we start to see
Speaker 3: more turnover in the home ownership.
Speaker 2: So we don't we don't look at it as a negative.
Speaker 3: We just know that there'll be something down the road
Speaker 3: coming where we can engage that next gen consumer as
Speaker 3: they become homeowners.
Speaker 1: All right, Nate, great to have you here.
Speaker 2: Thank you very much.
Speaker 1: Nate. Nate Baxter there. He is the CEO and president
Speaker 1: of Scott's Miracle Growth