The legal cannabis movement has a new supporter…The Scotts Miracle-Gro Company (NYSE: SMG).
Earlier this month, the leading marketer of branded consumer lawn and garden as well as indoor hydroponic growing products reported first quarter financial results. The numbers were not pretty and Scotts’ Hawthorne segment reported a 31% decrease in sales on a year-over-year basis.
Scotts Miracle-Gro is now lobbying for an end to federal restrictions that prevent cannabis businesses from accessing banking services. During the past few years, company executives have been working to persuade reluctant House and Senate lawmakers to remove restrictions from the cannabis sector (especially as it relates to banking reform for cannabis dispensaries).
We are not surprised by Scotts Miracle-Gro’s support for the legal cannabis sector. The company has made considerable investments in cannabis ancillary businesses and would be a major beneficiary of cannabis reform in the United States (US).
Scotts Miracle-Gro recently reabsorbed its indoor and hydroponic gardening subsidiary, Hawthorne, which supplies the cannabis industry with lighting, nutrients, growing media, fans, filtration and other supplies.
Although Hawthorne recorded impressive growth during the pandemic, sales have been slowing down since then and this has put pressure on the stock. Scotts Miracle Gro has fallen almost 70% from its high in March 2021 and Hawthorne’s under-performance played a significant role in the decline.
In 2021, Hawthorne made up nearly 30% of company sales before earnings dropped in 2022. Scotts Miracle-Gro’s management team blamed the slowdown on several factors, including oversupply, lower consumer demand and the federal prohibition of cannabis.
Scotts Miracle-Gro CEO Jim Hagedorn recently said, “It’s not lost on me that this business has been a drag on earnings. I want to emphasize that we believe in the future of the cannabis industry and its eventual turnaround. There is a huge amount of value that will be unlocked in Hawthorne once this rebound occurs.”
We believe the cannabis industry will benefit from lobbying support from companies like Scotts-Miracle-Gro. In prior years, the industry received lobbying support from companies including Uber Inc. (Nasdaq: UBER) and Amazon Inc. (Nasdaq: AMZN). We will monitor how pro-cannabis legislation advances this year and expect any positive development to serve as a massive catalyst for the cannabis sector.
If you are interested in learning more about companies that are lobbying for cannabis legislation, please send an email to email@example.com with the subject “Companies Lobbying For Legal Cannabis” to be added to our distribution list.
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