Central Garden & Pet Company
) recently reported sluggish second-quarter 2012 results. The
company's quarterly earnings of 45 cents a share were down 16.7%
from the prior-year quarter's earnings of 54 cents due to
short-term execution issues on account of transformational
initiatives undertaken. The analyst covered by Zacks had expected
the company to deliver earnings of 54 cents per share in the
Moreover, total revenue for the quarter decreased 4% to $466.9
million, reflecting sales decline in garden and pet products
segment. Moreover, the company's reported net sales fell well short
of the Zacks Consensus Estimate of $503 million.
During the reported quarter, gross profit shrinked 9.5% to
$147.7 million, whereas gross margin contracted approximately 200
basis points to 31.6%. The decline reflected a rise in raw material
costs and lower sales of high margin products. Operating profit for
the quarter was $45.2 million, indicating a decline of 24.2% from
the year-ago quarter.
Central Garden & Pet, one of the leading producers and
marketers of premium and value-oriented products, focuses on the
lawn & garden and pet supplies markets in the U.S.
Garden Products segment sales declined 6% year over year to
$244.4 million, reflecting lower sales of grass seed and wild bird
feed coupled with delay in filling orders. The segment reported an
operating profit of $36.6 million during the quarter, down 22% from
the year-ago quarter.
According to the company, the Garden Products segment's branded
product sales came in at $211.7 million, whereas sales of other
manufacturers' products came in at $32.7 million during the
Pet Products segment sales inched down 1% to $222.5 million,
reflecting decreased sales of wild bird feed. Moreover, the
segment's operating income decreased 10.3% year over year to $21
The segment's branded product sales came in at $179.8 million,
whereas sales of other manufacturers' products were $42.7 million
during the quarter.
Central Garden & Pet, which faces stiff competition from
The Scotts Miracle-Gro Company
), ended the quarter with cash and cash equivalents of $10.3
million, long-term debt of $566.6 million and shareholders' equity
of $448.8 million, excluding non-controlling interest of $173,000.
The leverage ratio was 5.5x for the quarter. Capital expenditures
for the quarter were $8 million. Management expects capital
expenditure of $30 million for fiscal 2012.
Currently, we maintain a long-term 'Neutral' recommendation on
the stock. However, Central Garden & Pet has a Zacks #4 Rank,
which translates into a short-term 'Sell' rating.
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