Central Garden & Pet Co.
) recorded earnings per share of 43 cents in second-quarter
fiscal 2014. The reported quarterly earnings fell 6.5% year over
year and missed the Zacks Consensus Estimate of 47 cents.
This leading lawn, garden and pet supplier recorded a net income
of $20.9 million for the second quarter of fiscal 2014, which
dropped 5.9% on a year-over-year basis.
To bring in some optimism, the company's top line inched up 1%
year over year to $501.6 million and surpassed the Zacks
Consensus Estimate of $499 million. The rise in sales was
facilitated by a favorable performance at the company's Garden
segment, partly offset by weakness in the Pet segment.
Gross profit slipped 3.6% to $147.6 million, while gross margin
shriveled 130 basis points (bps) to 29.4%. Selling, general and
administrative (SG&A) expenses as a percentage of sales
contracted 90 bps to 20.5%.
The fall in gross profit negated the improved SG&A, leading
the operating income to slide 4.1% to $44.8 million, with the
operating margin shrinking 50 bps to 8.9%.
Revenues at the Garden segment advanced 8% year over year to
$284.9 million on the back of robust after-Spring buying coupled
with enhanced distribution at various Garden businesses of the
company. Sales were also favorably impacted by the shift of April
sales to the second quarter. However, this shift is likely to
weigh on the segment's third-quarter sales.
The segment's branded product revenues jumped 8% to $247.3
million, while sale of other manufacturers' products was up 10%
to $37.6 million in the quarter. The segment's operating income
declined to $36.8 million from $34 million in the prior-year
quarter. Operating margin remained flat year over year at 12.9%,
as a decrease in gross margin was compensated by lower SG&A.
The Pet segment's net sales decreased 8% year over year to $216.7
million due to soft customer takeaways in the regions where
Central Garden takes part and lower retail distribution of few
The segment's branded product sales were down 12% to $169.8
million while sales of other manufacturers' products surged 12%
to $46.9 million in the quarter. The segment's operating income
slumped nearly 12% year over year to $24.2 million and its
operating margin contracted 50 bps to 11.2%.
Other Financial Details
The company, which competes with
), ended the year with cash and cash equivalents of $16.7
million, total debt of $545.3 million and shareholders' equity of
$484.3 million, excluding non-controlling interest of $1.2
As of Mar 29, 2014, the company had outstanding borrowings of $95
million and had an available borrowing capacity of $295 million
under the senior secured asset-based revolving credit facility.
Glancing Through the First Half of Fiscal 2014
During the first half of fiscal 2014, the company's earnings
improved to 17 cents a share, compared to 14 cents earned in the
same period last year. Further, net sales for the period climbed
marginally to $792.1 million from $790.7 million last year.
Overall, during the second quarter, Central Garden benefitted
from several initiatives like costs curtailment, management
restructuring, customer care enhancments and hike in fill rates.
However, the company still remains susceptible to various
operating challenges. Also, management believes that it still has
a year or more to go, before it is able to deliver a consistent
performance by leveraging its latest product pipeline.
Other Stocks to Consider
Currently, Central Garden carries a Zacks Rank #3 (Hold).
However, other better-ranked stocks in the same industry include
Prestige Brands Holdings, Inc.
), with a Zacks Rank #1 (Strong Buy) and
Summer Infant, Inc.
), holding a Zacks Rank #2 (Buy).
CENTRAL GARDEN (CENT): Free Stock Analysis
NUTRI/SYSTEM (NTRI): Free Stock Analysis
PRESTIGE BRANDS (PBH): Free Stock Analysis
SUMMER INFANT (SUMR): Free Stock Analysis
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