MARYSVILLE, Ohio (AP) -- The Scotts Miracle-Gro Co.'s shares plunged more than 16 percent Tuesday after the lawn and garden product maker reported 28 percent lower fiscal second-quarter net income and warned that its profit margin could suffer if costs for key materials keep rising.
Scotts reported Tuesday morning that it earned $127.2 million, or $2.05 per share, for the quarter that ended March 31. That's compared with $177.6 million, or $2.63 per share, in the same quarter last year.
Excluding one-time items, the company said it earned $2.15 per share, compared with $2.22 per share a year earlier. The adjusted earnings beat the average forecast from analysts surveyed by FactSet for $2.06 per share.
The company's quarterly revenue, which rose to $1.17 billion from $1.13 billion a year earlier, fell short of the consensus forecast for $1.2 billion.
Scotts said it was pleased with its sales for the peak lawn fertilizer season, but it said its gross margin for the period shrank to 39.5 percent from 41.1 percent because its costs and its sales shifted to less profitable items. The company partially offset those changes with a price hike of less than 1 percent.
The company said the margin was in line with its expectations, but it is closely monitoring its material and distribution costs, the mix of products it sells and any promotions that could cut its profitability.
Dave Evans, executive vice president and chief financial officer, said increasingly negative trends in any of these areas would increase the likelihood that Scotts' gross margin could fall below the low end of the range that the company outlined for this year.
Scotts stood by its forecast for 2012 adjusted earnings of $2.65 to $2.85 per share. Analysts anticipate $2.87 per share.
The shares fell $8.99 to $46.01 by early afternoon. They've traded between $39.99 and $60.62 the past year.