Central Garden & Pet Kicks Off Fiscal 2025 with Strong Q1 Performance
Central Garden & Pet Reports Company, a leading player in the pet and garden industries, has announced its financial results for the first quarter of fiscal 2025, which ended on December 28, 2024. The company reported robust growth across key metrics, driven by increased shipments, productivity improvements, and easing inflationary pressures. Niko Lahanas, CEO of Central Garden & Pet, expressed optimism about the quarter’s performance but emphasized that this period is typically the smallest quarter of the year. He noted that favorable shipment timing and promotional activities contributed to the positive results.
“We are encouraged by our first-quarter performance, but recognize this period is typically our smallest quarter and benefited from the favorable timing of shipments and promotional activities,” said Lahanas. “We remain confident in our fiscal year outlook and committed to executing our Central to Home strategy with excellence.”
Fiscal 2025 First Quarter Financial Highlights
Net Sales Growth:
Central Garden & Pet reported a 3% increase in net sales, reaching $656 million compared to $635 million in the same quarter last year. This growth was primarily attributed to higher shipment volumes and strategic promotional activities.
Gross Profit and Margin Expansion:
Gross profit rose significantly to $196 million, up from $179 million in the prior-year quarter. Gross margin expanded by 160 basis points to 29.8%, reflecting productivity gains and moderating inflation. These factors have helped the company improve profitability despite ongoing economic challenges.
SG&A Expenses:
Selling, general, and administrative (SG&A) expenses were $168 million, slightly lower than the $170 million recorded in the previous year. As a percentage of net sales, SG&A decreased by 140 basis points to 25.5%, showcasing the company’s commitment to cost discipline and operational efficiency.
Operating Income Surge:
Operating income saw a substantial increase, growing to $28 million from just $8 million in the prior year. Operating margin expanded by 300 basis points to 4.3%, underscoring the effectiveness of Central’s cost management and operational strategies.
Net Income and Earnings Per Share:
Net income for the quarter was $14 million, a significant improvement from $0.4 million in the prior year. Earnings per share (EPS) rose to $0.21, compared to $0.01 in the same period last year. Adjusted EBITDA also showed strong growth, increasing to $55 million from $37 million.
Effective Tax Rate:
The effective tax rate for the quarter was 23.5%, consistent with the company’s expectations and industry norms.
Pet Segment Performance
The Pet segment continued to be a strong performer, with net sales increasing by 4% to $427 million from $409 million in the prior-year quarter. This growth was primarily driven by customers shifting orders into the first quarter and the timing of promotional activities.
Operating Income and Margin Expansion:
Pet segment operating income grew to $51 million from $43 million in the prior year. Operating margin expanded by 140 basis points to 12.0%, reflecting productivity efforts and moderating inflation. Adjusted EBITDA for the Pet segment rose to $61 million from $54 million, highlighting the segment’s strong operational performance.
Garden Segment Results
The Garden segment also posted positive results, with net sales increasing by 2% to $229 million from $225 million in the prior year. Favorable weather conditions and customers shifting orders into the first quarter contributed to this growth.
Operating Income Turnaround:
Garden segment operating income improved dramatically, turning a loss of $9 million in the prior year into a profit of $2 million. Operating margin improved by 500 basis points to 1.1%, driven by moderating inflation, productivity gains, and the decision to exit the low-margin pottery business. Adjusted EBITDA for the Garden segment was $14 million, up from $2 million in the prior year.
Liquidity and Debt Management
Central Garden & Pet maintained a strong liquidity position, with a cash balance of $618 million at the end of the quarter, compared to $341 million a year ago. Cash used by operations during the quarter was $69 million, slightly lower than the $70 million used in the prior year.
Debt Levels and Leverage Ratio:
Total debt as of December 28, 2024, remained stable at $1.2 billion. The gross leverage ratio, calculated using definitions from Central’s credit agreement, improved to 2.9x from 3.0x at the end of the prior year quarter, indicating better financial health and reduced risk.
Stock Repurchase Program:
During the quarter, Central repurchased 1.68 million shares or $52 million of its stock. As of the end of the fiscal first quarter, $131 million remains available for future stock repurchases, demonstrating the company’s confidence in its financial position and future growth prospects.
Cost and Simplicity Program
Central continues to make significant strides in its multi-year Cost and Simplicity program. This initiative encompasses a wide range of efforts across procurement, manufacturing, logistics, portfolio management, and administrative costs. The goal is to streamline operations, enhance efficiency, and simplify the business across the organization. These efforts are expected to yield long-term benefits, contributing to sustained growth and profitability.
Fiscal 2025 Guidance
Central Garden & Pet remains optimistic about its fiscal 2025 outlook, expecting non-GAAP EPS to be $2.20 or better. This guidance takes into account the expected impact of recently announced tariffs, deflationary pressures in certain commodity businesses, shifting consumer behavior amid macroeconomic and geopolitical uncertainty, and challenges within the brick-and-mortar retail landscape.
The company’s outlook excludes the potential impact of acquisitions, divestitures, or restructuring activities that may occur during fiscal 2025, including initiatives associated with the Cost and Simplicity program. Central anticipates capital expenditures to range between $60 million and $70 million for the fiscal year.
