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Text: And for the Q&A session, we'll be joined by president and COO, Mike Lukemire.
I'd refer you to our Form 10-K, which is filed with the Securities and Exchange Commission, so that you might familiarize yourself with the full range of risk factors that could impact our results.
For the last month, I've been thinking about the key themes I wanted to cover today, and I also spent a lot of time thinking about who exactly I wanted to target with my remarks.
I won't spend a lot of time focusing on the quarter or the past year but it is worth pointing out that we've just finished our third straight record year, and remain extremely optimistic.
consumer was against a 24% comp, and a 39% growth in Hawthorne was against a comp of 64%.
I know there are obvious questions to address.
Our stance on pricing, the commodity outlook, excess inventory in the cannabis market, and our thoughts about capital allocation.
We'll cover all of these topics, as well as share our thoughts about fiscal '22.
But I've been a public company CEO for 20 years now.
And too often, I've seen the markets focus with short-term issues overwhelmed the bigger picture.
So I want to spend most of my time focused on more than our current results.
Frankly, there are a lot of great things happening at the company right now.
Some of them I can't share with you, but they're very exciting.
Our business is in important inflection point, one that could transform what we look like five years from now.
We have the opportunity to make this company stronger to make the moat around our business wider and deeper, and to empower a new generation of leaders to shape it through their eyes, not just mine or my executive team.
We also see the current volatility in the market as an opportunity.
If you're willing to lean in during times like this, there is potential to capture opportunities that others can't and an opportunity to further strengthen your competitive advantages, and leveraging those advantages, it's what drives long-term shareholder value.
So I want the real takeaway from today to be a better understanding of the journey we're on.
And I'll be honest, my target audience is pretty narrow.
To our sell-side friends, I appreciate the need to get your models refined and to share that information with your clients.
We're committed to giving you what you need, but my comments are not aimed at you.
My comments are also not aimed at short-term investors.
I'm not going to get pulled into a rabbit hole about our quarterly splits to spot market price of commodities, or a bridge to year-over-year SG&A.
I do, however, want to speak to those investors who see the long-term opportunity in SMG shares.
I want you to know where we're headed, and why we're confident that our efforts will create shareholder value.
I won't ignore the key questions about fiscal '22, but weave them into a broader context of how we're operating the business rather than the confines of how it impacts the P&L.
In order to look ahead, I need to look backwards for just a moment.
For the five-year period, we've completed on September 30.
Our strategic plan assumed a relatively mature core business, and enterprise growth of roughly 4% to 6%, driven by the higher growth at Hawthorne.
We sought to achieve a consistent shareholder return of 10% to 12% by leveraging the P&L, repurchasing shares, maintaining a roughly 2% dividend yield.
We also set a five-year target of cumulative free cash flow of $1.5 billion.
We exceeded each of those goals.
While we are proud of the achievement, we know that the strategy has run its course because the opportunities are different now.
And we're different, too.
And so the next step in our evolution will reflect these realities.
We have defined five distinct pillars of growth for the next five years.
Three of the five pillars, related to the U.S. consumer business; the other two are related to Hawthorne.
First, we see a higher level of sustainable growth with our existing brands in our core business based largely on our ability to reach a new generation of consumers.
Second, further growth of our direct-to-consumer efforts is there for the taking, if we invest in people, brands, partnerships and infrastructure.
Third, live goods remains a meaningful growth vehicle and a gateway for a more direct relationship with gardeners.
Our goal remains the same for consumers to see us as a gardening company, not a gardening supply company.
Fourth, to support Hawthorne's future growth, we must continue to put the commercial grower at the center of everything we do.
This means further strengthening our model, driven by innovation and technical solutions.
And fifth, there is no doubt the cannabis industry will continue to evolve and grow.
And there's little doubt that those companies, creative and courageous enough, to wait until that pool early, have the potential for a first mover advantage.
We've shown our willingness to do this when we created Hawthorne.
And as I'll describe later, we intend to do it again.
As we pursue these pillars, we are strengthening our team.
Focusing on succession planning, and ensuring our ESG efforts, are embedded into our operations, and also better understood by our key stakeholders.
We debated as a team and with our board whether to pursue all of these opportunities at once.
We all agreed we had to, but we recognize that succeeding against all these pillars requires us to reorganize and empower a new generation of leaders.
While there are no plans for me or any member of the current team to step away, nearly every member of my team has made changes to their organizations.
The level of oversight needed to succeed against these efforts requires Mike Lukemire to spend more of his time on the strategy and implementation of the fastest-growing areas of the business.
He has reshaped this organization so that each of these pillars reports directly to him.
consumer segment to Josh Peoples and Dave Swihart, who will effectively serve as co-leads of that business.
On the corporate side, Cory has fortified his leadership team with an infusion of outside talent.
And Denise Stump and Jim King have realigned their teams to better meet the needs of the business.
In addition, most of the M&A opportunities we're pursuing includes a management team that can further strengthen our own.
If every opportunity we see manifest itself, we could double the size of Scotts Miracle-Gro within five years.
That's not the goal necessarily.
We want smart growth, not growth simply for the sake of it, but the magnitude of the opportunity could be game changing.
Let me briefly tell you how we expect to execute against these pillars, or I can, I'll talk about them in the context of our expectations for next year.
Between the first two pillars, we believe the U.S. consumer segment can achieve sustainable long-term growth of 2% to 4% annually.
Our previous strategic plan assumed growth of 0% to 2%.
If we can sustain growth at this higher level, those added two points carry significant P&L leverage and improved cash flow.
It's worth noting that the guidance we set for next year assumes flat to slightly declining growth in the U.S. consumer segment.
This is based on an assumed reset of the business in a post-COVID world.
Specifically, we're planning for a decline in unit volume offset by pricing.
You'll remember from our Q3 call that we took roughly five points of pricing, effective in August.
In recent weeks, we've communicated to our retail partners a second price increase effective in January.
This more targeted increase will range from mid-single to low double-digits depending on the product line.
In total, we now expect pricing in '22 to be on the high single-digit side with the goal of covering commodity prices.
While we believe our sales assumption for '22 is a prudent way to plan, the trends suggest a better outcome.
Consumer POS, in units in fiscal '21 was six points higher than in 2020.
More importantly, it was 21 points better than fiscal '19 and actually got stronger later in the year.
Consumer volume during the fourth quarter of fiscal '21, while down seven points from last year's record performance was 35 points higher than the same period in fiscal 2019.
Consumers are showing us that lawn and garden is an essential part of their lives.
Every cut of the data tells us they have stayed with the category and our brands throughout this past season.
Those trends have continued in October.
While it's a relatively small month, it's an important conclusion to the season, especially in the Midwest and Northeast.
POS and units were up 4% in October, compared to last year's record result and up 42% compared to fiscal 2019.
As we enter the off-season, the POS numbers won't tell us much until February.
And obviously, we won't know until next summer, how much of the COVID bump we've retained.
But I'm confident we'll have a significantly higher base to grow from.
We continue to invest with that in mind.
Millennial homeowners clearly have become a demographic tailwind, and are more than offsetting baby boomers who are leaving the category.
This group of consumers care more about gardening than their parents, and see the categories more rewarding and purpose-driven as well.
A 30-year-old couple buying a home today and entering our category for the first time has the potential to stay with us for 20 years or longer.
We must operate with that time frame in mind.
We don't want our marketers to worry about hitting a target for Wall Street.
Their job is to drive consumer engagement, brand loyalty, and market share.
And we're going to give Josh Peoples and his team the tools to get that done.
The same holds true for our direct-to-consumer pillar.
This area is approaching 10% of our U.S. consumer sales and will only grow higher.
When we think about direct-to-consumer, it goes well beyond selling items on our website.
It also means collaborating closely with our retail partners to support their online efforts.
It also means finding new partners who can help us boost the appeal of gardening and have their own digital platforms that we leverage.
Patti Ziegler is one of our brightest and most creative leaders, and directs our direct-to-consumer effort.
In addition to the efforts I've already mentioned, she and her team have launched native online brands like green digs, knock-knock, and instead.
But one of their greatest successes has been with AeroGrow.
Patti has been a champion for the potential of our direct-to-consumer platform since day one, and continues to reimagine the future of this business.
Succeeding in our direct-to-consumer effort also requires improving our IT and supply chain infrastructure.
Dave Swihart, whose role has recently been expanded to lead both supply chain and R&D, is driving toward that goal.
We need to improve our ability to ship directly to consumers, especially in categories like live goods, which has significant online potential.
Until recently, our direct-to-consumer efforts didn't want your attention, but that's changed.
While it remains too early to gauge the ultimate potential of this pillar, it will be a significant contributor to growth as we go forward.
I'm equally convinced our third pillar, live goods will be even more important.
Live goods are the gateway to lawn and garden category, but historically have been highly regional, poorly marketed, and highly commoditized.
We believe, we can do better.
We've got a great start with Bonnie and its leader, Mike Sutterer, and we're working with Bonnie's other owner, Alabama Farmers Coop or AFC, to pursue other growth opportunities that holds significant potential.
Like us, AFC has a vision to create a national branded business across several categories of live goods.
Together, we believe we can better meet the needs of gardeners and our retail partners through innovation, marketing, and supply chain.
We've already made tremendous progress improving the Bonnie business.
And even there, we've only scratched the surface.
The other two pillars are related to Hawthorne.
Chris will spend more time discussing the current environment, but I want you to know I'm not obsessing about the sales in Q4 or what we think about Q1.
I believe Chris and his team have a good handle on the current environment.
More importantly, I believe they're navigating the choppiness in the market, while keeping their eye on the long-term opportunity.
If the market is challenged for a couple of quarters, expect them to take advantage of it.
We won't chase sales but we will take an aggressive stance to further solidify Hawthorne and strengthen its market position.
So expect us, for example, to further enhance our innovation efforts.
I finally visited our new R&D facility in British Columbia last week.
I've recently visited field stations in Oregon, Florida and, of course, Ohio.
What's been the takeaway, that the work we're doing on hemp and cannabis research, is changing the industry.
From lighting to nutrients, to growing media, our research is not just focused on continuing to improve our product offerings but more importantly, to help growers get a better and more cost-effective outcome.
Our unique understanding of plant science and the nuances of indoor cultivation is unmatched.
Not only is no one in the industry doing, what Hawthorne is doing, our competitors can't even try to replicate that model.
I think, you should keep that in mind.
We also are likely to use this period as an opportunity to step up our M&A efforts.
We continue to be disciplined in our M&A efforts but the economics of some of our deals have become more attractive recently.
The final pillar of our strategy is embedded into the recent creation of a new subsidiary called the Hawthorne Collective.
I've been alluding for months about the opportunities to invest in emerging areas of the cannabis industry, but this is my first opportunity to discuss the effort in detail.
It starts with our recent investment in RIV Capital, a Canadian-based publicly traded company, that owns or invest in a series of cannabis-related businesses.
We share a common vision with the other major investors at RIV, to create a fully integrated business, based on the acquisition of licenses for cultivation and distribution.
From there, Roof can partner with some of the most well-managed brands in the cannabis industry.
There's a lot of speculation regarding the potential for new brands to prosper, as the market expands in the categories like beverages.
However, too few people are focused on existing brands in traditional categories.
This is already a multibillion-dollar market, with brands operating in the silos of individual states.
We're convinced there is tremendous potential for some of those brands to flourish more broadly as the market expands, and our investment in RIV reflects that belief.
We believe that our unique level of expertise in the cannabis industry, gives us the right to win in areas beyond our existing portfolio.
However, today, we cannot make direct investments in those areas.
In fact, we can't even have a direct ownership stake in a company that does, but we can create an ownership option, which is what our convertible loan to RIV Capital reflects.
In the near term, we do not expect to see an impact from the investment in RIV on our P&L, and the amount of capital we've employed $150 million does not impact our ability to invest in other areas, or return cash to shareholders.
In the intermediate term, it is possible RIV may seek further capital infusions.
We could be interested depending on the opportunities I'm not going to speculate on how much we might invest.
The honest answer is it depends.
But just as we did when we purchased General Hydroponics, Botanicare, Gavita and Can-Filters, we're willing to make investments others might avoid, until there is more clarity about the future.
If you're a short-term investor, you may not like it.
But the long-term potential is real and is significant.
Ultimately, if we convert our financial interest in RIV into equity, which is definitely the goal, it may prompt us to reassess our current capital structure.
Many of you have asked if we break Hawthorne off as a separate company.
I've said we'd only consider doing that for strategic reasons, and not to chase valuation, and that's still true.
Over the past year, we've worked to understand what a potential separation would require, and I believe we're capable of pulling trigger on such a move if we decided, it made sense.
Let me be clear.
We have no near-term plans to do this.
But could it become a viable option?
I think, the possibility is growing.
As I transition to Cory, I want to emphasize that I'm just as confident about our near-term plans as I am about our long-term strategy.
The U.S. consumer business is performing well, and our consumers continue to demonstrate how important they see this category in their lives.
At Hawthorne, while we continue to expect top-line pressure through Q1.
I'm confident in our team's ability to power through it, and we still expect sales growth on a full year basis.
Are there more challenges out there right now than a year ago?
Am I thrilled with the equity price right now?
But we're on a path to build a better, and stronger business, and we won't be distracted by the noise around us.
I mentioned earlier that we exceeded all the financial targets that we set with our previous strategic plan.
And the goal is to remain on a path that allows shareholders to continue benefiting from the opportunities, I outlined in our new plan, and the pillars that I've discussed.
The confidence we all have is part of our decision to increase our share repurchase efforts.
I told you last quarter, we had allocated $250 million for that purpose.
We now expect to add another $100 million to that total, and we hope to acquire as many of those shares as possible in the next two quarters.
Cory, why don't you pick it up from here?
I'm going to spend a few minutes on the big themes from our Q4 results, especially around sales and gross margin.
And in between, I'll turn things over to Chris to provide some color on Hawthorne.
U.S. consumer sales did better than we expected, finishing up 11%, compared to the 7% to 9% growth we expected.
At $3.2 billion, sales grew by nearly $900 million in the last two years.
The supply chain team deserves a lot of credit for their ability to deliver this growth.
The targeted investments we have made and will continue making in this area will prove to be key.
Consumer engagement remained extremely strong through the fourth quarter, and that kept our retailers equally engaged.
consumer segment, sales declined 28% in Q4, we were up against a plus-92% comp.
Also, remember that Q4 had six fewer days this year than last year.
Adjusting for that, sales in the quarter would have declined 23%.
At Hawthorne, the calendar shift cost us sevent points for the quarter.
While year-over-year sales declined 2%, the segment would have been up 5% on an apples-to-apples basis when adjusting for the calendar.
And the U.S. Hawthorne business, grew by over 10% last year in Q4 given the same comparison.
Finally, recall that Hawthorne was up against a plus-64% comp in the same period a year ago.
On a full year basis, Hawthorne grew 39% to $1.4 billion.
I'll remind you that number was $640 million in fiscal 2019.
We have more than doubled the sales of that business in two years and all of that growth was organic.
On the segment profit line, Hawthorne earned $164 million in fiscal '21, for an operating margin of 11.5%.
The profit was up 46% from last year and more than 200% from 2019.
We've said repeatedly that we're trying to strike a balance between growth and improved profitability.
I think, the results speak for themselves.
As many of you know, I served as a finance lead at Hawthorne, almost since the inception of that business, before joining the corporate team as CFO.
As you look at the Hawthorne results, I encourage investors to look deeper than the numbers.
While the growth and profit improvements have been impressive.
The improvements we've made to how the business operates tell an even better story from the integration of seven separate businesses to the implementation of SAP, the revamping of our sales force, and the creation of the world's only cannabis-focused R&D program, the efforts of this team have been outstanding.
I know all of you want to know more about the current state of the business.
I'll leave the details around the numbers to Cory, but I know you guys are wondering about the current state of the industry, and how we're navigating it.
So let me address that for a few minutes.
We're, obviously, seeing some disruption in the market right now, but we expect it to be temporary.
Our field sales team, began seeing the signs of potential slowdown in late June.
We got smarter about the issues in July, and that allowed us to share some of those insights on our third quarter conference call in August.
That's when we caution that the growth will be significantly slower in Q4 than we've seen for the rest of the year.
Since then, many of you have been asking whether this will be a replay of 2018.
We don't see it that way at all, and we're not alone.
Some of you were in Las Vegas a couple of weeks ago for the MJBiz conference.
It's the largest cannabis trade show in the world.
And if you were there, you saw firsthand, that this is not an industry that's spreading about the future.
Consumer demand for cannabis products continues to grow, and the market continues to expand.
As it relates to the current environment, what was clear to me in Vegas, was the industry is becoming increasingly adept at navigating the choppiness that's inevitable in a market like this.
What's happening right now is actually pretty straightforward.
In California, there were simply too much cannabis harvested in the past few months, especially from outdoor growers in the northern part of the state.
On top of a strong harvest from the first turn of crops earlier in the year, many growers harvested their second crop of cannabis earlier this season due to concerns about wildfires drought, and in the case of the legacy market, fear of increased enforcement efforts.
The combination of too much product and relatively poor quality has put downward pressure on wholesale cannabis prices.
However, that issue should solve itself once the current supply makes its way through the marketplace, because the legacy market remains a big part of what's happening in California, the available data isn't great.
So that makes it hard to give you a precise answer on how long it will take for the current oversupply to work itself through the market.
That's why we're currently forecasting Hawthorne sales to decline in the first quarter.
That said, the single most important fact is the end market for cannabis continues to expand, and we expect to start seeing growth again in the new calendar year.
And virtually no one is expecting that fact to change for the foreseeable future.
In fact, many high-end growers have told us that current market issues are not impacting them at all, and they continue to flourish.
Another important fact to remember is that unlike in 2018, there are no regulatory issues getting in the way right now.
Three years ago, California badly boxed the rollout of the recreational marketplace.
That overwhelmingly was the issue that impacted the market back then.
It was nearly impossible to get a license to operate legally, regardless of whether you were a cultivator or a dispensary.
While the current marketplace in California remains more expensive and bureaucratic than other states, it is vastly improved from what we've seen in the past and the legal market there continues to grow.
Some of you are also wondering whether the current situation will result in some consolidation.
The answer is pretty simple.
Yes, of course, it will.
But those kinds of ebbs and flows are exactly what we expect to happen.
It's what happened in Colorado back in 2015, it happened in Oregon when it went legal, and it's likely to happen in California to some degree.
In fact, that's also what we're seeing right now in Oklahoma.
Like many new markets, Oklahoma, had explosive growth out of the gates and probably got a bit overbuilt.
So we expect to pause there before growth resumes.
We have told you repeatedly over the years that this industry is likely to be choppy from time to time.
This is not the first time the industry has seen an oversupply of cannabis and just to be clear, it will not be the last.
What's important for Hawthorne as we keep running our play.
The growth will be there in the long term.
I'm not worried about that.
Instead, I want to make sure that we're doing everything we need to distance ourselves from the competition.
Jim has already told you that we won't slow down on our innovation efforts, which, by the way, go much further than just new product development, which brings me full circle to the MJBiz conference a couple of weeks ago in Vegas.
Like most major trade shows, MJBiz, was canceled last year due to COVID.
So we haven't seen the industry all-in-one place for over two years.
What was clear to us and frankly, nearly everyone we interacted with is how far Hawthorne has come in those two years and how much we've distanced ourselves from the competition.
We have fundamentally changed our approach to selling, and that transformation is continuing.
We've brought new products to the market that have improved the results for growers, by both increasing the yields and lowering their operating costs.
And we've used the innovation to help us in more qualitative ways, like the establishment of the Hawthorne Social Justice Fund, within our corporate foundation.
While I understand the questions you all need to ask about the step down in our growth rate, I would urge you not to lose sight of the bigger picture.
There is no doubt that we're the clear leader in the industry.
There is no doubt that our competitive advantages are unique, and there's also no doubt that the cannabis industry still has miles of runway ahead of it.
So looking ahead at fiscal '22, I'm not worried about a few speed bumps.
Rather, I'm excited to see how much further we can push this business, and continue to lead the way in an industry, that remains poised for years of growth.
Let's move down the P&L now to the gross margin line.
Like nearly all other CPG companies, we've continue to see pressure from higher commodities and distribution costs.
However, the year-over-year change in the margin rate during Q4 require some additional context.
In Q4 of fiscal '21, the adjusted gross margin rate was 17.4% compared with 24.3% in 2020.
Companywide sales in Q4 of last year were up nearly 80%.
So the fixed cost leverage in a relatively small quarter drove a massive improvement in the margin rate.
If you compare the Q4 gross margin rate in '21 versus '19, you'll see the difference is only 100 basis points, and that difference is a combination of segment mix and higher commodity costs.
On a full year basis, the gross margin rate declined 270 basis points to 30.3%.
The year-over-year increase in commodity costs of about $85 million nearly all of which was on plan, was the primary reason for the decline, followed by higher distribution costs.
As you know, we did not adjust our prices this year until August in the U.S. consumer business.
So we had limited ability to offset the commodity inflation during the first three quarters of the year.
That story will change significantly in fiscal '22, which I'll explain further when I cover our guidance for next year.
Higher volume was able to drive improved fixed cost leverage, and conversion, to help offset the commodity cost increases.
SG&A came in 2 percentage points lower in fiscal '21 at $743 million.
It declined 21% in the quarter to $161 million.
Lower variable compensation was the main driver.
Also, in Q4 of 2020, and we used some of our strong earnings upside, to significantly increase our annual contribution to The Scotts Miracle-Gro Foundation, which we did not repeat in fiscal '21.
Interest expense was $5 million higher in Q4 compared with a year ago.
but essentially flat on a full year basis.
Remember, we issued $900 million of bonds in the second half of the year, which drove an increase in the quarter.
On the bottom line, adjusted net income, which excludes restructuring, impairment, and onetime items, was up 28% to $528 million or $9.23 a share.
That's just $0.01 shy of a $2 per share increase in a single year and more than twice the $4.47 a share we earned in 2019.
The earnings per share number is on the high end of the revised range we've set in early June, and is a major accomplishment given the difficult comps, and some of the cost hurdles we've had to clear in the second half of the year.
But instead of spending more time on those details, I want to switch gears and share our thoughts about goal '22.
This assumes the U.S. consumer segment is flat to minus 4%, and that Hawthorne grows 8% to 12%.
None of those ranges assume the potential impact from acquisitions.
consumer, we are going into the year with the assumption that unit volume will decline high single digits.
Roughly half of that decline is expected from lower shipments in the first half of the year.
Remember that last year's Q1 was up nearly 150%, as retailers worked hard to remedy depleted inventory levels.
Since current retail inventory levels remain higher than a year ago, we likely won't see a repeat of that kind of initial load-in.
We're also for planning purposes, assuming modest declines in consumer takeaway in fiscal '22, mostly driven by the difficult comps we've faced in the first half.
As Jim already indicated, consumer POS has been stronger than we expected in recent months, and has actually been positive for the fall season.
It's easy for us to lean in to meet the higher consumer demand if it comes, but the prudent play is to assume a slight decline.
Most and perhaps, all of the planned unit volume decline, should be offset by pricing.
You should see some benefit from pricing in Q1 from the August price increases, and the balance will begin during our Q2.
As it relates to Hawthorne, we're planning for 8% to 12% growth on a full year basis.
As we expect to see continued pressure in Q1.
As Chris said, it's hard to be precise regarding the current inventory supply issues in the industry, but we're hoping to see a return to growth sometime in Q2.
Let's move on to gross margin.
We expect to see gross margin rate decline by 100 to 150 basis points on a full year basis.
We are cautiously optimistic that our pricing moves will offset expected commodity pressure.
That said, we expect about 65% to 70% of our costs to be locked in by the end of the calendar year.
So we'll still have some exposure if costs move higher than the planned increases we are assuming.
The two biggest pressures on the rate next year, will come from lower fixed cost leverage and segment mix.
We would expect some leverage out of SG&A, meaning this line can range from a 6% decline year over year to a slight increase, maybe 2%.
There are no major moving pieces in SG&A, and we remain committed to investments, we believe will drive the business, not just in fiscal '22, but the years to follow.
Below the operating line, interest expense should be roughly $25 million higher, based on the full year impact of our recent bond offering.
Our guidance also assumes no offsetting earnings impact from acquisitions, which is a pretty conservative starting point.
All of this rolls up to a guidance range for adjusted earnings per share of $8.50 to $8.90.
I also want to talk about cash flow for a moment.
For the year we just completed, free cash flow, that's operating cash flow minus capex, came in at $165 million.
While that is low from historical standards.
There are three main reasons behind the year-over-year decline.
First was variable compensation that was earned in fiscal '20, but paid out in fiscal '21.
That was about a $60 million impact.
Second, we increased capex by about $45 million.
Third, inventory levels were up $500 million from fiscal '20.
While most of this increase was paid during the year, we did lean on our vendor partners more than in the past to achieve extended payment terms.
As we look to fiscal '22, we're aiming for free cash flow of up to $300 million.
We expect capex to increase again, and we also expect inventory levels, while flat on a unit basis to be higher overall because of the increased cost.
These investments are necessary to continue meeting the required service levels to our customers, which is the higher priority.
But as it relates to inventory, we find ourselves in a very good place right now.
In both U.S. consumer and Hawthorne, we believe some competitors will have a hard time meeting demand.
And in the consumer business, we expect the market to see shortages of grass, seed and sphagnum peat moss.
The key ingredient used in growing media.
We do not expect to be impacted by those issues, and we do not expect to have any problems getting our customers at the appropriate inventory levels either.
I agree with Jim's assessment.
We've got a lot of moving pieces right now and several active initiatives that could require us to update our outlook as we move through the year.
But even in the unlikely event that none of those efforts come to pass, I believe the business is in a great spot.
The challenges we're seeing on the cost of goods line are pretty consistent with what you've been hearing from other companies over the past two weeks.
And just as we said we would, we've taken aggressive action to stay ahead of all those challenges, and protect the profitability of the business.
When I think about how far this business has come in such a short period of time, it's hard not to feel good about where we sit right now.

user
compname announces intent for share repurchases of $300 million in fiscal 2022.
expect to continue pursuing acquisition opportunities throughout year.
in addition to $113 million of share repurchases in fiscal '21, plan to repurchase as much as another $300 million in 2022.
established guidance for fiscal 2022 based on expected company-wide sales growth of 0 to 3 percent.
sees 2022 non-gaap adjusted earnings per share anticipated to be in a range of $8.50 to $8.90.
scotts miracle-gro - at hawthorne, sees current over-supply of cannabis to put negative pressure on growth rate through calendar year and into q2.

assistant