Central Garden & Pet Company CENT reported fourth-quarter fiscal 2024 results, with the top line missing the Zacks Consensus Estimate but the bottom line exceeding the same. However, both metrics declined year over year.
Nonetheless, CENT remains on track with its Cost and Simplicity program. It focuses on making targeted investments and adding new products across pet and garden portfolios. Although management realizes that the external environment is tough, it remains confident to deliver profitable growth in fiscal 2025 and beyond.
CENT’s Quarterly Performance: Key Insights
Central Garden & Pet reported an adjusted quarterly loss of 18 cents per share, which was narrower than the Zacks Consensus Estimate of a loss of 20 cents. However, the bottom line declined from the year-ago period’s earnings of 8 cents per share.
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Central Garden & Pet Company Price, Consensus and EPS Surprise
Central Garden & Pet Company price-consensus-eps-surprise-chart | Central Garden & Pet Company Quote
The company generated net sales of $669.5 million, which came below the Zacks Consensus Estimate of $724 million. The metric also declined 11% from the year-ago period. Organic net sales decreased 13%, excluding the impact of the TDBBS acquisition and the sale of the independent garden channel distribution business.
The adjusted gross profit was $174.2 million compared with $199.2 million reported in the year-ago period. The adjusted gross margin contracted 60 basis points to 26%, primarily due to grass seed inventory impairment in the Garden segment.
Adjusted SG&A expenses of $185.5 million decreased from $187.2 million in the prior year quarter. As a percentage of net sales, the figure increased 270 basis points to 27.7%. These variances indicate lower volumes and the timing of spending related to productivity and commercial initiatives. We anticipated SG&A expenses to increase 140 basis points.
The adjusted operating loss was $11.4 million, down from the operating income of $12 million reported in the year-ago period. Adjusted EBITDA was $16.8 million compared with $41.6 million in the prior-year period.
CENT’s Segment Wise Performance Details
Net sales for the Pet segment was $435.3 million, indicating a 9.8% decrease compared with the previous year due to an extra week in the prior-year quarter. Organic net sales fell 13.6%, excluding the impact of the TDBBS acquisition.
The segment’s adjusted operating income was $34.6 million, down from $47.8 million reported in the prior-year quarter, due to lower volume and the timing of expenses related to productivity and commercial initiatives. Meanwhile, the adjusted operating margin contracted 190 basis points to 8%.
In the Garden segment, net sales of $234.2 million declined 12.4% from the year-ago period, primarily due to an extra week in the prior-year quarter. Organic net sales fell 11.2%, excluding the impact of the sale of the independent garden channel distribution business.
The segment’s adjusted operating loss of $24.9 million declined from an adjusted operating loss of $5.3 million reported in the prior year quarter, due to lower volume as well as the grass seed inventory impairment.
CENT’s Financial Health Snapshot
Central Garden & Pet ended the quarter with cash and cash equivalents of $753.6 million, long-term debt of $1,189.8 million and shareholders’ equity of $1,555.7 million, excluding the non-controlling interest of $1.9 million. The company repurchased about 270,032 shares or $9 million in the quarter under review. Management expects capital expenditures for fiscal 2025 to be in the range of $60-$70 million.
Sneak Peek Into CENT’s Outlook
Central Garden & Pet estimates fiscal 2025 adjusted earnings to be $2.20 per share or more. This forecast implies deflationary pressures in certain commodity sectors, shifting consumer behavior amid macroeconomic and geopolitical uncertainties and a challenging brick-and-mortar retail environment.
For the first quarter of fiscal 2025, CENT expects an adjusted loss of 5 cents per share or more compared with adjusted earnings of 1 cent in the same period of fiscal 2024.
Shares of this Zacks Rank #4 (Sell) company have lost 2.3% in the past three months compared with the industry’s decline of 0.8%.
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