Scotts Miracle-Gro's Hawthorne division, which focuses on hydroponics and indoor gardening products, reported revenue of $1.9 billion in the most recent quarter, up 85.4% year-over-year. Hawthorne's net margin expanded to 15.2%, a significant improvement from 10.5% in the prior-year period. The strong performance of Hawthorne reflects the growing consumer demand for home-based gardening and indoor farming solutions. As urban populations continue to rise and more people seek self-sufficiency, the hydroponics market is positioned for sustained long-term growth. Scotts' leading position in this market, with its broad product portfolio and established distribution channels, should allow it to capture an outsized share of this expanding pie. Hawthorne now accounts for nearly 12% of Scotts Miracle-Gro's total revenue, up from just 7% two years ago. This increasing revenue contribution from the higher-margin hydroponics business is driving overall margin expansion for the company. Scotts' net margin has improved from 10.6% to 12.2% over the same period. Looking ahead, I expect Hawthorne's strong growth trajectory to continue, with revenue expanding at a 20%+ annual rate over the next 2-3 years. This should allow Scotts to achieve a net margin of 14-15% by 2028, up from 12.2% currently. The company's leading position in the high-growth hydroponics market and its ability to leverage operational efficiencies make it an attractive long-term investment.

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