Central Garden & Pet Announces Q2 Fiscal 2025 Financial Results

Business Wire

07-05-2025

WALNUT CREEK, Calif.--(BUSINESS WIRE)--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.
'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.
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'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 [phone] (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.
CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
Three Months Ended
Six Months Ended
March 29, 2025
March 30, 2024
March 29, 2025
March 30, 2024
Net sales
$
833,537
$
900,090
$
1,489,973
$
1,534,623
Cost of goods sold
560,454
621,210
1,021,191
1,076,898
Gross profit
273,083
278,880
468,782
457,725
Selling, general and administrative expenses
179,759
185,433
347,466
355,866
Operating income
93,324
93,447
121,316
101,859
Interest expense
(14,510
)
(14,376
)
(28,980
)
(28,692
)
Interest income
5,152
2,903
11,892
7,512
Other income (expense)
744
(171
)
(973
)
822
Income before income taxes and noncontrolling interest
84,710
81,803
103,255
81,501
Income tax expense
19,903
19,134
24,267
18,265
Income including noncontrolling interest
64,807
62,669
78,988
63,236
Net income attributable to noncontrolling interest
1,174
682
1,346
819
Net income attributable to Central Garden & Pet Company
$
63,633
$
61,987
$
77,642
$
62,417
Net income per share attributable to Central Garden & Pet Company:
Basic
$
0.99
$
0.94
$
1.21
$
0.95
Diluted
$
0.98
$
0.93
$
1.19
$
0.93
Weighted average shares used in the computation of net income per share:
Basic
64,140
65,638
64,346
65,526
Diluted
64,879
66,831
65,171
66,815
Expand
CENTRAL GARDEN & PET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Six Months Ended
March 29, 2025
March 30, 2024
Cash flows from operating activities:
Net income
$
78,988
$
63,236
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization
42,580
45,357
Amortization of deferred financing costs
1,347
1,340
Non-cash lease expense
29,987
25,753
Stock-based compensation
9,528
8,927
Deferred income taxes
2,525
2,673
Other operating activities
(1,056
)
1,811
Change in assets and liabilities (excluding businesses acquired):
Accounts receivable
(252,375
)
(240,408
)
Inventories
(67,654
)
(59,263
)
Prepaid expenses and other assets
(11,542
)
(7,492
)
Accounts payable
50,504
41,475
Accrued expenses
28,416
46,785
Other long-term obligations
2,100
673
Operating lease liabilities
(29,043
)
(25,169
)
Net cash used by operating activities
(115,695
)
(94,302
)
Cash flows from investing activities:
Additions to plant, property and equipment
(16,760
)
(19,478
)
Payments to acquire companies, net of cash acquired
(3,318
)
(59,818
)
Investments
—
(850
)
Other investing activities
(125
)
(140
)
Net cash used in investing activities
(20,203
)
(80,286
)
Cash flows from financing activities:
Repayments of long-term debt
(145
)
(159
)
Repurchase of common stock, including shares surrendered for tax withholding
(98,233
)
(12,055
)
Payment of contingent consideration liability
—
(57
)
Distribution to noncontrolling interest
(1,346
)
(900
)
Net cash used by financing activities
(99,724
)
(13,171
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
(1,444
)
415
Net decrease in cash, cash equivalents and restricted cash
(237,066
)
(187,344
)
Cash, cash equivalents and restricted cash at beginning of period
768,403
502,873
Cash, cash equivalents and restricted cash at end of period
$
531,337
$
315,529
Supplemental information:
Cash paid for interest
$
28,976
$
28,695
Cash paid for income taxes
$
13,368
$
13,775
Lease liabilities arising from obtaining right-of-use assets
$
30,776
$
24,652
Expand
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.
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.
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.
Operating Income Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended March 30, 2024
Six Months Ended March 30, 2024
(in thousands)
Net sales
$
900,090
$
—
$
900,090
$
1,534,623
$
—
$
1,534,623
Cost of goods sold and occupancy
621,210
2,527
618,683
1,076,898
2,527
1,074,371
Gross profit
$
278,880
$
(2,527
)
$
281,407
$
457,725
$
(2,527
)
$
460,252
Selling, general and administrative expenses
185,433
2,743
182,690
355,866
2,743
353,123
Income from operations
$
93,447
$
(5,270
)
$
98,717
$
101,859
$
(5,270
)
$
107,129
Gross margin
31.0
%
31.3
%
29.8
%
30.0
%
Operating margin
10.4
%
11.0
%
6.6
%
7.0
%
Expand
Pet Segment Operating Income Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended
Six Months Ended
March 29, 2025
March 30, 2024
March 29, 2025
March 30, 2024
(in thousands)
GAAP operating income
$
60,614
$
62,659
$
111,871
$
106,047
Facility closure
(1
)
5,339
—
5,339
—
Non-GAAP operating income
$
65,953
$
62,659
$
117,210
$
106,047
GAAP operating margin
13.4
%
13.0
%
12.7
%
11.9
%
Non-GAAP operating margin
14.5
%
13.0
%
13.3
%
11.9
%
Expand
Garden Segment Operating Income Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended
Six Months Ended
March 29, 2025
March 30, 2024
March 29, 2025
March 30, 2024
(in thousands)
GAAP operating income
$
58,731
$
57,066
$
61,154
$
48,180
Facility closure
(2
)
—
5,270
—
5,270
Non-GAAP operating income
$
58,731
$
62,336
$
61,154
$
53,450
GAAP operating margin
15.5
%
13.6
%
10.0
%
7.5
%
Non-GAAP operating margin
15.5
%
14.8
%
10.0
%
8.3
%
Expand
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended March 29, 2025
Pet
Garden
Corporate
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
63,633
Interest expense, net
—
—
—
9,358
Other income
—
—
—
(744
)
Income tax expense
—
—
—
19,903
Net income attributable to noncontrolling interest
—
—
—
1,174
Income (loss) from operations
60,614
58,731
(26,021
)
93,324
Depreciation & amortization
9,498
10,443
705
20,646
Noncash stock-based compensation
—
—
4,018
4,018
Facility closure
(1
)
5,339
—
—
5,339
Adjusted EBITDA
$
75,451
$
69,174
$
(21,298
)
$
123,327
Expand
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
Three Months Ended March 30, 2024
Pet
Garden
Corporate
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
61,987
Interest expense, net
—
—
—
11,473
Other expense
—
—
—
171
Income tax expense
—
—
—
19,134
Net income attributable to noncontrolling interest
—
—
—
682
Income (loss) from operations
62,659
57,066
(26,278
)
93,447
Depreciation & amortization
11,124
11,014
674
22,812
Noncash stock-based compensation
—
—
2,907
2,907
Facility closures
(2
)
—
5,270
—
5,270
Adjusted EBITDA
$
73,783
$
73,350
$
(22,697
)
$
124,436
Expand
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
Six Months Ended March 29, 2025
Pet
Garden
Corporate
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
77,642
Interest expense, net
—
—
—
17,088
Other expense
—
—
—
973
Income tax expense
—
—
—
24,267
Net income attributable to noncontrolling interest
—
—
—
1,346
Income (loss) from operations
111,871
61,154
(51,709
)
121,316
Depreciation & amortization
19,578
21,574
1,428
42,580
Noncash stock-based compensation
—
—
9,528
9,528
Facility closure
(1
)
5,339
—
—
5,339
Adjusted EBITDA
$
136,788
$
82,728
$
(40,753
)
$
178,763
Expand
Adjusted EBITDA Reconciliation
GAAP to Non-GAAP Reconciliation
Six Months Ended March 30, 2024
Pet
Garden
Corporate
Total
(in thousands)
Net income attributable to Central Garden & Pet Company
$
—
$
—
$
—
$
62,417
Interest expense, net
—
—
—
21,180
Other income
—
—
—
(822
)
Income tax expense
—
—
—
18,265
Net income attributable to noncontrolling interest
—
—
—
819
Income (loss) from operations
106,047
48,180
(52,368
)
101,859
Depreciation & amortization
21,922
22,020
1,415
45,357
Noncash stock-based compensation
—
—
8,927
8,927
Facility closures
(2
)
—
5,270
—
5,270
Adjusted EBITDA
$
127,969
$
75,470
$
(42,026
)
$
161,413
Expand