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NOVATO, CA-Scotts Miracle-Gro Co. said this week it will shut down Smith & Hawken, a Novato, CA-based 56-store chain that has been a perpetual drag on the Marysville, OH-based public company’s earnings. A third-party consultant is managing the sell-off, which began Thursday, the same day the company shut down its website, catalog and call center operations; all brick-and-mortar stores will be shuttered by the end of the year.

Smith & Hawken leases all of its stores as well as its corporate headquarters at 4 Hamilton Landing. In the Bay Area, Smith & Hawken has stores in Berkeley, Burlingame, Walnut Creek, Mill Valley, Los Gatos, Palo Alto and Roseville.

Scotts’ says it spoke with several potential investors over the past 12 months with hope it could find a buyer and preserve and franchise and the jobs, according to CEO Jim Hagedorn. “However…it became obvious that shutting down the business was the best option available,” he says in a prepared statement. “The combination of a weak economy and the lack of scale proved too great to overcome.”

Hagedorn called it a sad outcome that was in the best long-term interest of Scotts, whose core lawn and garden business continues to expand and add jobs. “By eliminating the losses from Smith & Hawken, we can invest even further in driving profitable growth and enhancing shareholder value,” he said.

Scotts, which employs approximately 6,400 full-time workers, acquired Smith & Hawken in 2004 for $68.5 million. The chain has consistently underperformed since it was acquired. Through the first half of fiscal 2009, which ended March 29, the segment that includes the chain produced a 23% decline in sales and a $75.4-million operating loss, while the company’s overall performance produced a $20.4 million profit, according to SEC filings.

Scotts expects to take an after-tax charge of $25 million related to lease terminations and severance costs. Most of the charges will be incurred during the fourth quarter of fiscal 2009 and the first quarter of fiscal 2010. The shutdown is expected to provide a $0.15 boost to adjusted earnings per share beginning in fiscal 2010, Scotts said.

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