Scotts Sees Opportunity as Competitor Shuts Down

Scotts Miracle-Gro Co. is working on a deal to produce private-label lawn and garden products for major retailers to take advantage of a competitor's exit from that market.

The Marysville, Ohio-based company already makes a private-label lawn fertilizer, Expert Gardener, which is sold in Walmart stores. Scotts now is in talks with its largest retail partners to provide them with private-label lawn fertilizer and growing products, such as mulch and soil.

"The discussions are ongoing," said Scotts spokesman Jim King. "I suspect that what the retailers are looking for is to make sure they have suppliers who can provide them with lawn and garden products for the upcoming season."

The talks come as Spectrum Brands, an Atlanta-based conglomerate, announced Tuesday that it will shut down its growing-products division, which makes fertilizers, enriched soils, mulch and grass seed. The shutdown is expected to be completed by Jan. 31, the company said in its fourth-quarter earnings report.

Spectrum Brands makes products for both Home Depot and Lowe's, which are sold alongside Scotts' Turf Builder fertilizer.

With Spectrum leaving, King said Scotts is in discussions with retailers to "fill that niche."

It's too soon to tell what kind of financial boost the company could receive from the move, King said.

"We're not going to talk about the potential financial impact because right now, it's too early to know," he said.

At least one analyst is optimistic about what this means for Scotts.

CL King & Associates analyst Jim Barrett said because Scotts already has the mechanism in place to make private-label products, it stands to profit a great deal if it can pick up even half of the sales Spectrum is leaving behind.

"A company has vaporized," he said of Spectrum. "It's as if they sprayed Roundup on it.

"I view that as quite a positive in both the near term and long term for Scotts."

His company upgraded Scotts' shares from "accumulate" to "strong buy" yesterday.

On the news, Scotts shares rose $3.07, or 12.8 percent, to close at $27.

In the 2008 fiscal year, ended Sept. 30, Scotts reported a loss of $10.9 million, or 17 cents a share, despite record sales of $2.98 billion.