UPDATE 2-Strong lawn-care season drives Scotts Q1 beat

Tue Feb 2, 2010 11:58am EST

* Q1 adj loss $0.73/shr vs est loss $0.83/shr

* Q1 sales up 6 pct, beat Street view

* Reaffirms 2010 adj EPS $3.00-$3.10 vs est $3.11

* Says to launch bird food at Home Depot, Lowe's

* Shares up 2 pct (Recasts; adds details, analyst comments, share movement)

By Nivedita Bhattacharjee

BANGALORE, Feb 2 (Reuters) - A strong fall lawn-care season helped Scotts Miracle-Gro Co (SMG.N) beat quarterly estimates, and the lawn and garden products maker said it would launch branded lines of bird food at Home Depot (HD.N) and Lowe's (LOW.N) this year.

Chief Executive Jim Hagedorn said on a conference call with analysts that the company has also expanded distribution of its Scotts-branded premium bird food at Walmart stores (WMT.N).

"In the long run, the launch at Home Depot and Lowe's is a big boost for them because they are moving into markets that they've not been in before," BGB Securities analyst Sam Yake said.

"Because they (Scotts Miracle-Gro) are such a powerful company, they'll get shelf space for these brands and it's a tremendous positive for them."

However, the company kept its earlier forecast for the full year, and said it expects full-year gross margin rate to be flat compared with the prior year.

Scotts Miracle-Gro, whose products include grass seeds, fertilizers, herbicides, potting soils and related tools, said price points will remain relatively flat in 2010.

"The evidence is that they are going to do better than they said they would, but they are being very conservative with the forecast," analyst Yake said, adding that if the weather does not remain conducive, it can impact the company's sales.

The company expects 2010 earnings of between $3.00 and $3.10 a share, below analysts' expectation of $3.11 a share, according to Thomson Reuters I/B/E/S.

"Early shipments to our retailers have been strong... In addition, we have locked in over 60 percent of our most sensitive commodities and are maintaining strong expense control," Chief Financial Officer Dave Evans said in a statement.

During the first quarter, consumer purchases of its branded products at its largest U.S. retailers rose 14 percent, with sales of lawn fertilizer up 32 percent, CEO Hagedorn said.

For the quarter ended Jan. 2, the Marysville, Ohio-based company reported a net loss of $57.7 million, or 88 cents a share.

Excluding items, it posted a loss of 73 cents a share, while analysts were expecting a loss of 83 cents.

Net sales rose 6 percent to $302.2 million, boosted by strong results at its global consumer segment.

Scotts Miracle-Gro shares were up 2 percent at $40.73 Tuesday morning on the New York Stock Exchange. (Additional reporting by Shradhha Sharma in Bangalore; Editing by Vinu Pilakkott)

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