Scotts Miracle-Gro CEO Nate Baxter Talks Growth Strategy

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**Romaine Bostick** (0:07)
We want to take a look at gardening product maker Scotts Miracle-Gro, unveiling new growth targets in its investor day today.
Fresh off a new CEO appointment, the company says the adjusted EPS and sales targets are part of a quote growth algorithm with legs into 2029 And to put a finer point on that, the company putting out those mid-range financial targets fiscal 2027 through fiscal 2029, average annual adjusted EPS growth of 5 to 8 percent. Fresh off that investor day right here in Studio 2, is the CEO and president of Scotts Miracle-Gro, Nate Baxter. Great to see you, Nate.

**Nate Baxter** (0:42)
Thanks for having me.

**Romaine Bostick** (0:43)
I know you're getting settled into the job. You had to come talk to the Wall Street hordes. How did they treat you today?

**Nate Baxter** (0:47)
Everybody was great.

**SPEAKER_1** (0:48)
Yeah.

**Nate Baxter** (0:49)
The reality is I've been having conversations for the last 18 months with our investors. So while the title has changed, the underlying strategy is still consistent with what I've been talking about for the better part of two years.

**Romaine Bostick** (0:59)
Well, let's talk about the underlying strategy. When I see EPS grow at the 5 to 8 percent, that doesn't seem aggressive, but it's not necessarily low either, given all of the complexities going on in the world today. What gives you the confidence that you can meet that?

**Nate Baxter** (1:11)
Well, we do recognize it's conservative. It's in the sweet spot of a value investor. If I look at the last couple of years, we've had a lot of volatility in the markets, a lot of events between tariffs and the war in Iran that we just couldn't predict. So our point of view is we're going to be fairly conservative, we are going to turn into a growth company.
We believe that the underlying initiatives that we outlined today are going to get us to where we need to be. But we also wanted to be honest with investors about growth. I told the team, I think we can outperform that. But our focus right now, especially from a capital allocation standpoint, is getting that leverage down a little bit.

**Romaine Bostick** (1:43)
So with regards to the growth strategy, and forgive me, I don't mean to be flip about it, but when I think about the products you sell, obviously iconic brand, the branded products, but that doesn't seem like a growth story, unless I'm missing something.

**Nate Baxter** (1:54)
Well, I think you have to look at it a couple of ways. So we do believe there's a lot of organic growth possible. Our average household penetration is only about 10%. So if you look at the 85 million households out there, only being penetrated by 10%, we have a lot of organic opportunity. Now, the question is, how do we convince consumers to engage with us in our category? So I think that's one of the fundamentals. The other is that we know channels.
Consumers are shopping channels that they didn't before. You come out of the pandemic. I think we had something like less than 5% of our total point of sale that was through e-commerce. Now, we're up to 13%.
300 bips alone this year. So what we're realizing is we need to go to where the consumer is, especially the younger consumer, and they're in totally different channels.

**Romaine Bostick** (2:34)
Well, talk to me a little bit about that, because what is sort of... I mean, you talked about this at The Investor. You talked about this on your earnings last week, I believe, as well, about digital advertising and your approach to it. What does this mean? You're just making like, you know, funny things on TikTok or is it a little more sophisticated?

**Nate Baxter** (2:50)
No, I mean, we certainly don't want to cheapen the brands. It's more sophisticated than that. What we're recognizing is we need to meet the consumer where we are. You know, we used to be a traditional media company. You would buy those up fronts. You would have a fixed date. The cost was sunk. You would run it. The weather might not be great. Not necessarily the right way to do your media strategy. So we've now pivoted where 80 percent of our media is digital. And it does two things that are really important. One is we get to tailor it for individual consumers.
And the second thing is we get to be really agile with it. We can decide on a Monday if the weather is not going to be good in Chicago this weekend, we can pull back or we can redirect it. So it allows us to be much more effective. And we've seen a commensurate increase in the media ROI as a result of that.