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Scotts Miracle-Gro (NYSE: SMG) trimmed its financial expectations for the fiscal year on Thursday, but the company but reiterated its commitment to critical targets and signaled confidence in its strategy despite a more challenging environment.

The Marysville, Ohio-based company now anticipates adjusted EBITDA earnings of $530 million to $540 million, about 20% above the previous year but below its earlier forecast of $575 million, according to a news release. Scotts also dialed back its outlook for U.S. consumer segment sales growth to 5% to 7%, from a prior estimate of high-single digits.

“We are seeing year-over-year growth and feel good about our overall performance,” Chairman and CEO Jim Hagedorn said in a statement, noting the company’s confidence in its ability to drive long-term shareholder value despite the revised guidance.

Central to that effort is Scotts’ goal of generating $1 billion in free cash flow over two years. The company said it remains on track, with plans to deliver $560 million in the current fiscal year. Scotts also aims to pare its debt by at least $350 million and boost its full-year gross margin by a minimum of 250 basis points.

“Our decisive actions are contributing to sales growth, strong free cash flow generation, and significantly improved year-over-year adjusted EBITDA, putting us in position to exit 2024 with leverage below 5 times,” CFO Matt Garth said.

The lawn-and-garden giant has grappled with oversupply and a sharp downturn in its Hawthorne unit, which serves the cannabis growing industry. In April, Hawthorne surprised the company by outperforming internal profit forecasts for the first time, buoyed by strength in higher-margin proprietary brands.

The cannabis industry, while struggling, is showing some signs of life. Hawthorne stands to benefit from a potential merger involving one of its investments,  New York-based RIV Capital (CSE: RIV) (OTC: CNPOF), which is in late-stage talks to combine with Florida-based Cansortium Inc. (CSE: TIUM.U) (OTCQB: CNTMF). The deal would give Scotts a sizable stake in a new multistate operator with greater scale and reach.

Federal action to ease marijuana restrictions could also provide a lift, though Scotts has been measured in its optimism on that front.

The company previously said a restructuring effort, which included layoffs and facility closures, has better positioned Hawthorne to navigate a range of scenarios. Scotts still sees long-term value in the cannabis industry, Hagedorn told investors this year.

Scotts plans to share additional details on its outlook at the William Blair growth-stock conference Thursday in Chicago. The company reaffirmed its commitment to its strategy and key financial targets.

The post Scotts Miracle-Gro trims outlook, maintains key targets appeared first on Green Market Report.

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Adam Jackson, KahliBuds, 420GrowLife