Central Garden & Pet Announces Q2 Fiscal 2025 Financial Results

Delivers fiscal 2025 Q2 GAAP EPS of $0.98 vs. $0.93 and non-GAAP EPS of $1.04 vs. $0.99 a year ago amid softer sales in the quarter

Reaffirms outlook for fiscal 2025 non-GAAP EPS of $2.20 or better

Central Garden & Pet Company (NASDAQ:CENT) (NASDAQ:CENTA) ("Central"), a market leader in the pet and garden industries, today announced financial results for its fiscal 2025 second quarter ended March 29, 2025.

This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20250507708476/en/

"We are pleased with our solid second-quarter results. Despite expected softer sales, our continued focus on improving productivity and execution of our Cost and Simplicity program drove margin and earnings per share growth above last year's performance," said Niko Lahanas, CEO of Central Garden & Pet. "Although a significant portion of the garden season is still ahead, and notwithstanding the uncertain macroeconomic and geopolitical environment, we are reaffirming our fiscal year outlook and remain committed to delivering on our Central to Home strategy with excellence."

All comparisons are against the second quarter of fiscal 2024.

Fiscal 2025 Second Quarter Financial Results

Net sales were $834 million, a decrease of 7%.

Gross profit was $273 million, a decrease of 2%. Gross margin expanded by 180 basis points to 32.8%, driven by productivity efforts from Central's Cost and Simplicity program.

SG&A expense was $180 million, a decrease of 3% reflecting cost discipline across the organization. Due to lower net sales, SG&A as a percentage of net sales increased by 100 basis points to 21.6%.

Operating income was $93 million, in line with the prior year. Operating margin expanded by 80 basis points to 11.2%. Non-GAAP operating income was $99 million, also in line with the prior year. On a non-GAAP basis, operating margin expanded by 80 basis points to 11.8%.

Net interest expense was $9 million compared to $11 million.

Net income was $64 million, an increase of 3%. Non-GAAP net income was $68 million, also an increase of 3%.

Earnings per share were $0.98, an increase of $0.05. Non-GAAP Earnings per share were $1.04, also an increase of $0.05.

Adjusted EBITDA of $123 million was $1 million below the prior-year quarter.

The effective tax rate was 23.5% compared to 23.4% in the prior year.

Pet Segment

Net sales for the Pet segment were $454 million, a decrease of 6%, driven primarily by the timing of customer orders and promotional events that shifted sales into the first quarter and assortment rationalization and softer demand in durable pet products in the second quarter.

Pet segment operating income was $61 million, a decrease of 3%. Operating margin expanded by 40 basis points to 13.4%. Non-GAAP operating income was $66 million, an improvement of 5%. On a non-GAAP basis, the operating margin expanded by 150 basis points to 14.5%, driven by productivity improvements.

Pet segment adjusted EBITDA of $75 million was $2 million above the prior-year quarter.

Garden Segment

Net sales for the Garden segment were $380 million, a decrease of 10%, primarily due to customers shifting pre-season orders into the first quarter, unfavorable weather resulting in a late-breaking spring selling season and the loss of two product lines in Central's third-party distribution business.

Garden segment operating income was $59 million, an increase of 3%. Operating margin expanded by 190 basis points to 15.5% driven by productivity efforts.

Garden segment adjusted EBITDA of $69 million was $4 million below the prior-year quarter.

Liquidity and Debt

The cash and cash equivalents balance at the end of the quarter was $517 million, an improvement of $215 million driven by earnings and ongoing inventory reduction efforts over the last 12 months.

Cash used by operations during the quarter was $47 million compared to $25 million a year ago.

Total debt as of March 29, 2025, and March 30, 2024, was $1.2 billion. The gross leverage ratio, as defined in Central's credit agreement, at the end of the second quarter, was 2.9x, in line with the prior-year quarter.

Central repurchased 1.2 million shares or $41 million of its stock during the quarter. After the second quarter end, Central repurchased an additional 1.2 million shares or $39 million of its stock through April 30, 2025. As of April 30, 2025, $63 million remained available for future stock repurchases.

Cost and Simplicity Program

Central continues to achieve meaningful progress in its multi-year Cost and Simplicity program, which comprises a comprehensive suite of initiatives across procurement, manufacturing, logistics, portfolio management, and administrative expenditures. These initiatives are intended to streamline operations, enhance organizational efficiency, and drive simplification across the enterprise.

In the second quarter of fiscal 2025, Central began winding down its operations in the United Kingdom and is moving to a direct-export model to service customers in the U.K. and certain European markets. As a result, Central's Pet segment incurred $5.3 million in initial costs, including $4.4 million in cost of goods sold and $0.9 million in selling, general and administrative costs, all of which was non-cash.

Fiscal 2025 Guidance

Central continues to expect fiscal 2025 non-GAAP EPS to be $2.20 or better. This outlook reflects an expected shift in consumer behavior amid macroeconomic and geopolitical uncertainty, challenges within the brick-and-mortar retail landscape, and the weather variability anticipated for the remainder of the fiscal year. This outlook excludes the potential impact from further changes in tariff rates, or from acquisitions, divestitures, or restructuring activities that may occur during fiscal 2025, including initiatives associated with the Cost and Simplicity program.

Central anticipates fiscal 2025 capital expenditures of approximately $60 million.

Conference Call

Central's senior management will host a conference call today at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to review the fiscal 2025 second quarter results and provide a general business update. The call, along with related materials, can be accessed at http://ir.central.com.

Alternatively, to listen to the call by telephone, dial (201) 689-8345 (domestic and international) entering confirmation #13751785.

About Central Garden & Pet

Central Garden & Pet Company (NASDAQ:CENT) (NASDAQ:CENTA) understands home is central to life and has proudly nurtured happy and healthy homes for over 40 years. With fiscal 2024 net sales of $3.2 billion, Central is on a mission to lead the future of the pet and garden industries. The Company's innovative and trusted products are dedicated to helping lawns grow greener, gardens bloom bigger, pets live healthier, and communities grow stronger. Central is home to a leading portfolio of more than 65 high-quality brands including Amdro^®, Aqueon^®, Cadet^®, C&S^®, Farnam^®, Ferry-Morse^®, Four Paws^®, Kaytee^®, Nylabone^® and Pennington^®, strong manufacturing and distribution capabilities, and a passionate, entrepreneurial growth culture. Central is based in Walnut Creek, California, with over 6,000 employees primarily across North America. Visit www.central.com to learn more.

Safe Harbor Statement

The statements contained in this release which are not historical facts, including statements concerning productivity initiatives, the expected impact of tariffs, deflationary pressure in certain commodity businesses, an expected shift in consumer behavior and earnings guidance for fiscal 2025, are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. All forward-looking statements are based upon Central's current expectations and various assumptions. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements contained in this release including, but not limited to, the following factors:

• economic uncertainty and other adverse macroeconomic conditions, including a potential recession;
• impacts of tariffs or a trade war;
• risks associated with international sourcing, including from China;
• fluctuations in energy prices, fuel and related petrochemical costs;
• declines in consumer spending and the associated increased inventory risk;
• seasonality and fluctuations in our operating results and cash flow;
• adverse weather conditions and climate change;
• the success of our Central to Home strategy and our Cost and Simplicity program;
• fluctuations in market prices for seeds and grains and other raw materials, including the impact of significant declines in grass seed market prices on our inventory valuation;
• risks associated with new product introductions, including the risk that our new products will not produce sufficient sales to recoup our investment;
• dependence on a small number of customers for a significant portion of our business;
• consolidation trends in the retail industry;
• supply shortages in pet birds, small animals and fish;
• potential credit risk associated with certain brick and mortar retailers in the pet specialty segment;
• reductions in demand for our product categories;
• competition in our industries;
• continuing implementation of an enterprise resource planning information technology system;
• regulatory issues;
• potential environmental liabilities;
• access to and cost of additional capital;
• the impact of product recalls;
• risks associated with our acquisition strategy, including our ability to successfully integrate acquisitions and the impact of purchase accounting on our financial results;
• potential goodwill or intangible asset impairment;
• the potential for significant deficiencies or material weaknesses in internal control over financial reporting, particularly of acquired companies;
• our dependence upon our key executives;
• our ability to recruit and retain members of our management team and employees to support our businesses;
• potential costs and risks associated with actual or potential cyberattacks;
• our ability to protect our trademarks and other proprietary rights;
• litigation and product liability claims;
• the impact of new accounting regulations and the possibility our effective tax rate will increase as a result of future changes in the corporate tax rate or other tax law changes;
• potential dilution from issuance of authorized shares; and
• the voting power associated with our Class B stock.

These and other risks are described in greater detail in Central's Annual Report on Form 10-K for the fiscal year ended September 28, 2024, filed with the Securities and Exchange Commission on November 27, 2024. Central assumes no obligation to publicly update these forward-looking statements to reflect new information, future events, or any other development.

Use of Non-GAAP Financial Measures

We report our financial results in accordance with GAAP. However, to supplement the financial results prepared in accordance with GAAP, we use non-GAAP financial measures including non-GAAP net income and diluted net income per share, non-GAAP operating income, and adjusted EBITDA. Management uses these non-GAAP financial measures that exclude the impact of specific items (described below) in making financial, operating and planning decisions and in evaluating our performance. Also, Management believes that these non-GAAP financial measures may be useful to investors in their assessment of our ongoing operating performance and provide additional meaningful comparisons between current results and results in prior operating periods. While Management believes that non-GAAP measures are useful supplemental information, such adjusted results are not intended to replace our GAAP financial results and should be read in conjunction with those GAAP results.

Adjusted EBITDA is defined by us as income before income tax, net other expense, net interest expense and depreciation and amortization and stock-based compensation expense (or operating income plus depreciation and amortization expense and stock-based compensation expense). Adjusted EBITDA further excludes one-time charges related to facility closures. We present adjusted EBITDA because we believe that adjusted EBITDA is a useful supplemental measure in evaluating the cash flows and performance of our business and provides greater transparency into our results of operations. Adjusted EBITDA is used by our management to perform such evaluations. Adjusted EBITDA should not be considered in isolation or as a substitute for cash flow from operations, income from operations or other income statement measures prepared in accordance with GAAP. We believe that adjusted EBITDA is frequently used by investors, securities analysts and other interested parties in their evaluation of companies, many of which present adjusted EBITDA when reporting their results. Other companies may calculate adjusted EBITDA differently and it may not be comparable.

The reconciliations of these non-GAAP measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are shown in the tables below.

Non-GAAP financial measures reflect adjustments based on the following items:

• Facility closures: we have excluded the charges related to our decision to close distribution and manufacturing facilities as they represent infrequent transactions that impact the comparability between operating periods. We believe these exclusions supplement the GAAP information with a measure that may be useful to investors in assessing the sustainability of our operating performance.

From time to time in the future, there may be other items that we may exclude if we believe that doing so is consistent with the goal of providing useful supplemental information to investors and management.

1. During the second quarter of fiscal 2025, we recognized incremental expense of $5.3 million in the consolidated statement of operations, related to the decision to wind-down our operations in the U.K. and the related facility there as we move to a direct-export model.
2. During the second quarter of fiscal 2024, we recognized incremental expense of $5.3 million in the consolidated statement of operations, from the closure of a manufacturing facility in Chico, California, and the consolidation of our Southeast distribution network.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250507708476/en/

Investor & Media Contact

Friederike Edelmann

VP, Investor Relations & Corporate Sustainability

(925) 412-6726

[email protected]