February 3, 2009 / 1:08 PM / 10 years ago

UPDATE 3-Scotts shines as gardening gets interest in gloom

* Q1 results get help from pre-season buying

* Raises 2009 profit outlook

* Lower commodity costs to help 2009

* Sees private-label brands boosting results

* Shares jump as much as 12 pct (Recasts; adds more analyst comments, background, conference call details, share movement)

By Dhanya Skariachan

BANGALORE, Feb 3 (Reuters) - While most consumer-goods makers struggle in a bleak retail environment, No.1 lawn and garden products maker Scotts Miracle-Gro Co (SMG.N) is benefitting from the recession as consumers forced to stay away from malls prepare to spruce up their gardens at home.

The company, which reported a narrower-than-expected quarterly loss in the historically weak first quarter, boosted its 2009 forecast as it is helped by a drop in commodity costs.

In the latest first quarter, more U.S. retailers made purchases from the company even before the gardening season started.

“Strong organic sales growth in the off-season quarter is indicative of resilience of Scotts Miracle-Gro’s categories,” Jefferies & Co analyst Douglas Lane said.

Even Scotts Lawn Service, which helps customers grow and maintain their lawns, held up “fairly well,” indicating that consumers aren’t leaving the discretionary category and that lawn and garden remains an attractive recessionary business, SunTrust Robinson Humphrey analyst William Chappell said.

Chappell has a “buy” rating on Scotts Miracle-Gro’s stock.

The company expects 2009 earnings of about $2.10 a share to $2.30 a share, before items, up from its prior outlook of about $2.00 a share.

“The fact that management is confident in raising its outlook in February for this highly seasonal business seems to indicate a high degree of confidence in its outlook for the full year,” said Jefferies’ Lane, who has a “buy” rating and price target of $34 on the company’s stock.

Scotts Miracle-Gro, whose brands include Ortho, Hyponex and Turf Builder, also expects higher sales of private-label products — in which retailers put their own labels on what are often lower-priced goods made for them by vendors — and favorable interest rates to aid its 2009 results.

The Marysville, Ohio-based company has been talking with several U.S. retailers to supply private-label products in fiscal 2009 after rival Spectrum Brands Inc SPCB.PK shut down its business that makes products such as fertilizer and mulch.

“By leveraging our supply chain, sales force and other overhead, private label will be accretive to earnings,” the company said on a conference call.

Scotts Miracle-Gro, whose products include grass seeds, fertilizers, herbicides, potting soils and related tools, reported a first-quarter net loss of $57.0 million, compared with a loss of $56.8 million a year earlier.

Excluding items, the company lost $52.1 million.

Sales at the company, which has historically posted losses in the first quarter, rose 3 percent to $318 million.

Scotts Miracle-Gro competes with Bayer CropScience AG, a unit of German chemicals and drugs giant Bayer BAYG.DE, and Dow AgroSciences, a unit of Dow Chemical Co (DOW.N).

More than 472,400 Scotts Miracle-Gro shares changed hands in intraday trading Tuesday, about twice their 50-day moving average volume.

The shares rose to a high of $35.65, before paring some gains to trade up $2.17 at $33.90 Tuesday afternoon on the New York Stock Exchange.

For the alerts, double-click [ID:nWNAB7243] . (Editing by Vinu Pilakkott, Himani Sarkar, Pratish Narayanan)

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