On Sep 3, we downgraded our long-term recommendation on
Central Garden & Pet Company
) to Underperform based on the company's dismal third-quarter
2013 performance. The stock currently carries a Zacks Rank #5
Why the Downgrade?
Estimates for Central Garden & Pet have shown a downtrend
since the company reported disappointing third-quarter results on
Aug 7, 2013.
The company's dismal performance continued even in the third
quarter. The quarterly earnings of 28 cents a share missed the
Zacks Consensus Estimate of 42 cents by miles and plunged 40.4%
year over year. Top line also decreased 7% year over year to
$494.1 million and fell short of the Zacks Consensus Estimate of
$525 million. Decline in both Pet and Garden segments and tough
year-over-year comparisons were to blame. Lower sales led to a
fall in consolidated gross profit.
We observe that the Central Garden & Pet's transformation
activities are failing to show the desired results and therefore
we remain skeptical about the future prospects of the company as
the lack of improvement is dashing all hopes of recovery, at
least in the near term. The company's poor performance is evident
from its earnings surprise history.
The company has missed the Zacks Consensus Estimate in the
trailing 4 quarters by an average of 16.5%, which is a matter of
concern. The lower-than-expected results triggered a downtrend in
the Zacks Consensus Estimate, as analysts become less
constructive on the stock's future performance. This is evident
from the movement witnessed in the Zacks Consensus Estimate that
dipped 35.9% to 25 cents for 2013 and 8.1% to 57 cents a share
for 2014 in the past 60 days.
Other Stocks that Warrant a Look
Not all retail stocks are performing as disappointingly as
Central Garden & Pet. Other stocks worth considering include
Citi Trends, Inc.
Fortune Brands Home & Security, Inc.
Lumber Liquidators Holdings, Inc.
), all sporting a Zacks Rank #1 (Strong Buy).
CENTRAL GARDEN (CENT): Free Stock Analysis
CITI TRENDS INC (CTRN): Free Stock Analysis
FORTUNE BRD H&S (FBHS): Free Stock Analysis
LUMBER LIQUIDAT (LL): Free Stock Analysis
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