BOCA RATON, Fla., July 26, 2024 (GLOBE NEWSWIRE) — Saxena White P.A. has filed a securities fraud class action lawsuit (the “Class Action”) in the United States District Court for the Southern District of Ohio against The Scotts Miracle-Gro Company (“Scotts” or the “Company”) (NYSE: SMG) and certain of its executive officers (collectively, “Defendants”). The Class Action asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and U.S. Securities and Exchange Commission (“SEC”) Rule 10b-5 promulgated thereunder on behalf of all persons and entities that purchased Scotts common stock between June 2, 2021 and August 1, 2023, inclusive (the “Class Period”), and were damaged thereby. The Class Action filed by Saxena White P.A. is captioned: City of Inkster Policemen and Firemen Retirement System v. The Scotts Miracle-Gro Company, et al., No. 24-cv-3766 (S.D. Ohio).
The Class Action complaint expands the class period and allegations asserted in a related action against Scotts and certain of its executive officers captioned: City of Hialeah Employees’ Retirement System v. The Scotts Miracle-Gro Company, et al., No. 24-cv-3132 (S.D. Ohio filed June 6, 2024) (the “Hialeah Employees Action”). Specifically, the Class Action expands the class period pled from November 3, 2021 to August 1, 2023 in the Hialeah Employees Action, to June 2, 2021 to August 1, 2023 in the Class Action, which alleges that Defendants engaged in a channel-stuffing scheme and misrepresented Scotts’ inventory levels, consumer demand for Scotts’ products, and that the Company remained in compliance with its debt covenants.
Pursuant to the notice published on June 6, 2024 in connection with the filing of the Hialeah Employees Action, and as required by the Private Securities Litigation Reform Act of 1995 (PSLRA), investors wishing to serve as lead plaintiff are required to file a motion for appointment as lead plaintiff by no later than August 5, 2024. Saxena White’s filing of the Class Action does not alter the lead plaintiff deadline.
Based in Marysville, Ohio, Scotts is one of the world’s largest marketers of branded consumer products for lawn and garden care. The Company reports results from three business segments: U.S. Consumer, The Hawthorne Gardening Company (“Hawthorne”), and Other. Throughout the expanded Class Period, the U.S. Consumer and Hawthorne segments generated more than 90% of Scotts’ revenue. After facing surging demand for its products prompted by the COVID-19 pandemic, Scotts significantly increased its inventory for both its U.S. Consumer and Hawthorne segments. However, the Company soon realized it had purchased more inventory than consumers demanded. Rather than write down the excess inventory or disclose the issue to investors, Defendants instead engaged in a scheme to stuff Scotts’ sales channels with more inventory than could be sold to consumers. The revenues generated from the scheme enabled Scotts, which was highly leveraged, to maintain debt-to-earnings ratios at levels that barely met requirements under the Company’s debt covenants.
The Class Action alleges that, during the Class Period, the Defendants made materially false and/or misleading statements and failed to disclose material adverse facts about the Company’s business, operations, and prospects, including that: (1) Scotts had an oversupply of inventory that far exceeded consumer demand prior to the start of the Class Period; (2) Defendants engaged in a channel-stuffing scheme to saturate the Company’s sales channel with more product than those retailers could sell through to consumers; (3) Scotts was only able to satisfy its debt covenants through its channel-stuffing scheme; and (4) as a result of the above, Defendants’ positive statements about the Company’s business, operations, and prospects were materially false and misleading and/or lacked a reasonable basis at all relevant times.
These failures, misrepresentations, and other undisclosed issues were revealed to the market through public disclosures in 2022 and 2023. The truth began to emerge on June 8, 2022, when Scotts issued a press release revealing that replenishment orders from its U.S. retailers were more than $300 million below target in the month of May alone. As a result, Scotts reduced its fiscal 2022 full-year guidance by nearly 50% and planned to take on additional debt to cover restructuring charges in an effort to cut costs. On this news, the price of Scotts common stock shares fell almost 9%, from a closing price of $102.18 per share on June 7, 2022, to a closing price of $93.13 per share on June 8, 2022.
The truth was fully revealed to investors before the markets opened on August 2, 2023 when Scotts issued a press release disclosing that quarterly sales for the fiscal third quarter of 2023 had declined by 6%. The Company also slashed its guidance for fiscal year earnings before interest, taxes, depreciation, and amortization (“EBITDA”) by a staggering 25% and announced a $20 million write-down of “pandemic driven excess inventory.” Finally, the Company revealed that it had to modify its debt covenants. On this news, the price of Scotts common stock shares plummeted 19%, from a closing price of $71.44 per share on August 1, 2023, to a closing price of $57.86 per share on August 2, 2023.
If you purchased Scotts common stock during the Class Period and were damaged thereby, you are a member of the “Class” and may be able to seek appointment as lead plaintiff. If you wish to apply to be lead plaintiff, a motion on your behalf must be filed with the U.S. District Court for the Southern District of Ohio no later than August 5, 2024. The lead plaintiff is a court-appointed representative for absent members of the Class. You do not need to seek appointment as lead plaintiff to share in any Class recovery in the Class Action. If you are a Class member and there is a recovery for the Class, you can share in that recovery as an absent Class member.
You may contact Marco A. Dueñas (mduenas@saxenawhite.com), an attorney at Saxena White P.A., to discuss your rights regarding the appointment of lead plaintiff or your interest in the Class Action. You also may retain counsel of your choice to represent you in the Class Action. You may obtain a copy of the Complaint and inquire about actively joining the Class Action at www.saxenawhite.com.
Saxena White P.A., with offices in Florida, New York, California, and Delaware, is a leading national law firm focused on prosecuting securities class actions and other complex litigation on behalf of injured investors. Currently serving as lead counsel in numerous securities class actions nationwide, Saxena White has recovered billions of dollars on behalf of injured investors.
CONTACT INFORMATION
Marco A. Dueñas, Esq.
mduenas@saxenawhite.com
Saxena White P.A.
10 Bank Street, Suite 882
White Plains, New York 10606
Tel.: (914) 437-8551
Fax: (888) 631-3611
www.saxenawhite.com
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