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本帖最后由 superdigua 于 2022-9-16 22:01 编辑
从短缺到过剩。斯考特奇迹公司被埋没在化肥中
Sept. 15, 2022
斯考特公司在大流行期间加大了生产力度，然后消费者转向，零售商削减了订单，留下了一堆库存。它现在正试图挖掘自己的出路。
https://www.wsj.com/articles/sco ... tilizer-11663261193
Never in the modern global economy have businesses seen such a rapid shift from shortage to glut.
Jim Hagedorn says he is lucky it didn’t get him fired.
Just months ago, the chief executive of Scotts Miracle-Gro Co. SMG -4.94%▼ was bracing for the biggest summer ever. After two years of struggling to fill store shelves, the company had ramped up production to catch up with consumer demand for lawn seed, fertilizer and other garden products. Investments in new manufacturing capacity were paying off as the 67-year-old CEO prepared for the usual rush of May orders from retailers looking to replenish their stocks.
The orders never came, and by Memorial Day, Mr. Hagedorn knew his company was in trouble. Scotts has already cut about 450 jobs, or around 6% of its workforce, since May, and more layoffs are coming. Manufacturing plants have been slowed. Cash is dwindling. Nobody is getting bonuses. Instead, the company is in full-blown crisis mode.
“I love working, but this isn’t exactly the s—hole I was planning to live in toward the end of my career, working my way out of a goddamn latrine,” Mr. Hagedorn said. “But that’s what it is and that’s where I am.”
Versions of this story are playing out across business sectors, where makers of everything from clothing to kitchen appliances have gone from trying to catch up to demand to buckling under the weight of their own inventory, in a matter of weeks. Now many companies are cutting jobs, idling plants and working to undo many of the other steps they took to ensure they would have enough products to sell.
Scotts, Mr. Hagedorn said, was largely a casualty of bloated inventory at big retailers like Walmart Inc., Target Corp. and Home Depot Inc. Those companies didn’t foresee the sharp reversal in buying behavior that has taken place in recent months as shoppers, squeezed by inflation, cut back on furniture, electronics and other goods and shifted spending to travel, food and fuel.
Newell Brands Inc., the maker of Yankee candles and Sharpie markers, said that in a span of six weeks starting in early August, it went from being comfortable with its retailer stocks to cutting its sales and cash-flow forecasts for the year after chains slashed orders. “A number of our top retailers have chosen to make a more dramatic inventory reduction certainly than we expected,” Christopher Peterson, the chief financial officer, said at an investor conference this month.
Scotts was in the middle of its active selling season when Covid-19 shut down much of the global economy. Early in the pandemic, the company’s manufacturing operations were deemed essential because fertilizer is important to the food supply and most retail stores that sold such products also remained open.
Production was chaotic. Scotts began paying workers a 50% premium, but entire shifts would typically be sent home if someone got sick. Scotts changed from three eight-hour shifts to two 12-hour shifts to use available workers as much as possible.
It soon became clear that homebound families or those fleeing cities would garden more than ever before. Stores had already been stocked for spring when Covid-19 arrived, but keeping shelves filled soon became a problem. When the quarter closed at the end of June 2020, sales in the consumer business, which make up around two-thirds of the company’s total revenue, were up more than 20%. Empty shelves indicated Scotts could have sold even more.
“Our best guess is that we missed about $200 million in sales because we just couldn’t deliver,” Mr. Hagedorn said. “We picked up 10 years of growth in a year, that first year of Covid.”
Scotts typically builds inventory in the fall and winter in preparation for spring, its peak season. More than three quarters of sales in the North America consumer business come in the first six months of the calendar year.
By the next spring, in April 2021, Mr. Hagedorn told investors that the rapid sales growth meant inventory was below an acceptable level, which meant leaving sales on the table and frustrating retailers. Still, consumer sales rose more than 10% in fiscal 2021, which ended Sept. 30.
Meanwhile, Scotts had been investing rapidly in a multiyear project to expand production—a major shift from the conservative, slow-and-steady model it had held for decades. Its Marysville, Ohio, headquarters, where Scotts was founded in 1868, got upgraded packaging and processing equipment, along with new control systems. In other facilities, Scotts added new equipment, including expanding the capabilities of some locations with new mixing lines.
Capital expenditure in the consumer business almost doubled to $52 million in 2020 and rose to $78 million in 2021, according to S&P Global Market Intelligence.
By November 2021, the company’s chief financial officer assured investors Scotts was in a good place on inventory. The company set conservative expectations for 2022, forecasting that consumer unit sales would fall because of strong year-ago comparisons, but that price increases would offset the decline. At the end of December, total inventory was up 55% to $1.7 billion, almost doubling its pre-pandemic level.
In early May, when Scotts delivered its fiscal second-quarter results, it said spring rain had clipped some sales, but that consumer demand was strong. The company was optimistic that the usual parade of May reorders would come but warned that it might have excess inventory.
By the middle of the month, it was becoming clear those orders weren’t coming.
Scotts asked stores why they reduced orders and learned they planned to carry lighter stock.
They had stocked up on merchandise of all sorts before realizing that consumer spending patterns shifted as the pandemic eased, leaving them with bloated inventory that would take months to whittle down. So instead of having large piles of fertilizer at the front of the stores or aisle ends, the stores wanted to use that space to clear out other merchandise. Scotts said there was no warning that the order change was coming.
Retailer orders were more than $300 million below expectations for May. “By Memorial Day, it was like, turn everything off immediately. We need to preserve money,” Mr. Hagedorn said.
The big jump in inventory tied up cash—as of the end of June, Scotts had just $28 million in cash, down from $244 million at the same time last year.
Over the summer, the company has slowed some manufacturing, closed some distribution centers and made changes to other facilities to make them more flexible to demand. A lighting manufacturing facility from Washington state was merged into an existing plant in California. If needed, workers there can now work on lighting fixtures for half a day and then spend the other half assembling lawn seed spreaders.
The existing fertilizer inventory won’t spoil so it can be sold off into next season, and the company doesn’t plan to cut prices to move it.
Mr. Hagedorn has pledged that more job cuts are coming, and along with the cuts that began in May the company hasn’t filled open positions.
“We are tightening our belts severely,” he said, adding: “I’m probably overcorrecting.”
Third-quarter results in early August showed a bleak outlook—consumer sales for the year were now expected to be down 8% to 9%.
Scotts also reported a net loss related to its nonconsumer business, which is mostly made up of its Hawthorne segment. The unit sells equipment and supplies for the cannabis growing industry. Scotts bought up smaller companies for years and saw rapid sales growth, but expects revenue to drop this year because of what it calls market saturation.
Scotts is using fiscal 2019 as a rough guide for budgeting and financial planning, Mr. Hagedorn said, and rethinking its strategy in the face of inflation and the risk of recession.
It’s stockpiling some raw materials to hedge against price increases. A ton of urea, the basic building block of fertilizer, has been costing around $500, down from $900 earlier this year but twice the $250 it cost at the beginning of the pandemic. Analysts are warning that natural-gas shortages in Europe could cause urea prices to spike again, so Scotts has been buying as much as it can. It has set up a temporary rail yard near its Marysville headquarters to hold cargo cars full of urea.
Scotts’ shares, around $120 just before the pandemic, are now trading around $56—after peaking at more than $250 in March 2021.
“Our ability to absorb a lot of shots in the business is very high,” Mr. Hagedorn said. “It’s just, when everything goes against you, it eats you alive.”
Mr. Hagedorn joined the family business in 1987 after seven years of flying F-16s in the Air Force. His father, Horace, had co-founded Miracle-Gro in the 1950s, and the plant-food company quickly capitalized on the surging demand for garden products that came with the post-World War II home-building boom. He sold his business to Scotts Co. for $200 million in 1995 in a deal that made the Hagedorns the largest shareholders of the combined company. Six years later, Jim Hagedorn was named CEO.
Blunt and loud, Mr. Hagedorn has a bald head, gray goatee and salty tongue. He speaks fast, prefers video calls instead of the phone and regularly walks around headquarters talking to employees.
Three times a week, he wakes at 3 a.m. and flies his own plane from the East Coast to the Marysville offices. After hitting the gym, he is in the office by 7:30 a.m., usually with his German shepherds, who join him in the plane. The dogs roam the office, and some workers keep treats for them on their desks.
The Hagedorn family controls more than 25% of the company’s shares. Mr. Hagedorn’s sister, Katherine, sits on the board, his son Christopher is a division president and his son Nicholas works as a government-affairs analyst.
Raymond James analyst Joe Altobello said Scotts could have done a better job of forecasting and that it was slow to respond. While the drop in consumer sales by unit was “pretty much what we expected coming into this year,” the fact that retailers weren’t reordering “was the big difference,” he said. “They got caught flat-footed.”
Scotts said its forecasts were accurate until a sudden shift in retailer orders in late April and early May.
The warehouse at Scotts. ‘By Memorial Day, it was like, turn everything off immediately. We need to preserve money,’ said Mr. Hagedorn.
Scotts’ decision to produce so much inventory at a time when retailers were overstocked with durable goods may have made it easier for the retailers to reduce their orders, said Andrew Carter, analyst with Stifel, an investment bank. Big-ticket items like grills take longer to sell down, he said, but lawn and garden goods should move faster.
If the retailers know that Scotts can quickly resupply them, it makes sense to carry fewer weeks of that inventory. “They put themselves in a position where they were a pretty easy target,” Mr. Carter said.
Last month, Walmart, Target and Home Depot reported their collective second-quarter inventory jumped $20 billion from a year ago, meaning the stores are still working to sell their current stock.
Home Depot and Lowes Cos., which together accounted for about 40% of Scotts’ fiscal 2021 sales, also said last month that the weather in many parts of the country reduced demand for products like fertilizer, which had been one of the biggest sales categories in the previous two years.
In late August, Scotts said full-year cash flow would be negative $275 million to $325 million, compared with a projection of negative $150 million in early August. The company also disclosed that its finance chief, Cory Miller, had left the company. Board member David Evans took the interim role as it seeks external candidates for a replacement.
Mr. Hagedorn wants the company to get back to its roots.
On this office wall there is a framed 1996 article from The Wall Street Journal about the family’s takeover and their “remolding Scotts to reflect their own thrifty, entrepreneurial ways.” He said his current mission to cut costs and keep the company leaner in terms of inventory and debt is to return to those ways. |
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发表于 2022-9-15 07:07
