Scotts Miracle-Gro won 2020 thanks to lawns, but it could win 2021 thanks to pot
Potting soil, pot... Same thing, right? Scotts Miracle-Gro has a green thumb in more ways than one. You might know Scotts for its gardening and lawn care products. But Scotts is also kind of a cannabis company: its hydroponic systems help "specialty crops" grow indoors with special lighting and no soil. Shocker: weed growers love it. Scotts made both sides greener last quarter:
- Lawn and garden sales soared 147% from 2019, as Scotts rode the House Hype trend. Stir-crazy hours bring May flowers: we stocked up on soil food to level up our lawns.
- Hydroponics sales jumped 71% as more US states legalized recreational pot and a Dem-controlled government appeared more likely.
- Scotts total sales more than doubled from 2019, and it posted a first quarter profit for the first time. Now it's even doing a Super Bowl ad (fitting).
Every rose has its Hawthorne... A few years ago, Scotts decided it wanted a piece of the pot market (minus the pot). So it bought up 50 hydroponics-related brands, which now make up its Hawthorne division. Last quarter's growth was primarily driven by the lawn/garden segment, which makes up more than half of Scotts' total sales. But Hawthorne makes up the rest, and it's quickly catching up.
Investors are optimistic about federal legalization... of pot. The Democrat-controlled Congress and White House support decriminalizing cannabis at the federal level. Just this week, Senate Majority Leader Chuck Schumer unveiled a plan to end the federal marijuana prohibition, arguing it's good for racial justice. Meanwhile, more states are legalizing recreational use. That's partly why Scotts' stock has nearly 2X'd over the past year. Also: the Global X Cannabis ETF, which tracks a number of pot stocks, is up 75% this year.