Central Garden & Pet Company CENT turned in a strong second-quarter fiscal 2026, with adjusted earnings of $1.29 per share, up 24% from $1.04 a year ago. The results beat the Zacks Consensus Estimate of adjusted earnings of $1.08 by 19.4%.
Net sales of $906.2 million increased 8.7% year over year and topped the consensus mark of $838 million by 8.1%. The strong top-line performance was driven by growth across both operating segments, shipment timing shifts from the first quarter into the second and continued strength in higher-margin consumables categories.
Central Garden & Pet Company Price, Consensus and EPS Surprise
Central Garden & Pet Company price-consensus-eps-surprise-chart | Central Garden & Pet Company Quote
CENT Lifts Margins on Better Leverage
Gross profit rose to $299.6 million from $273.1 million a year ago. The gross margin expanded 30 basis points to 33.1%. CENT’s gross profit trends reflected improved scale, even as the company managed mix and cost dynamics. Adjusted gross profit rose to $299.6 million from $277.5 million a year ago, supported by higher volume across both segments.
The adjusted gross margin was 33.1% versus 33.3% in the prior-year quarter. Management attributed the margin profile to productivity gains and a favorable mix in Pet, which helped offset higher manufacturing costs and a lower-margin sales mix in Garden. We estimated the adjusted gross margin to be 33.4% in the quarter under review.
Central Garden & Pet converted the quarter’s gross profit into improved operating performance through tighter cost control and SG&A leverage. Operating income rose sharply to $113.9 million from $93.3 million in the prior-year period, while the operating margin improved to 12.6% from 11.2%. Adjusted operating income increased to $114.2 million from $98.7 million in the year-ago quarter. The adjusted operating margin improved to 12.6% from 11.8%.
Adjusted EBITDA increased to $139 million from $123 million, while the adjusted EBITDA margin expanded 60 basis points year over year to 15.4%.
Adjusted SG&A expenses were $185.5 million, beating our estimate of $182.4 million and rising 3.7% year over year. However, as a percentage of sales, adjusted SG&A improved to 20.5% from 21.6%, reflecting sales leverage and continued simplification initiatives.
CENT Pet Segment Delivers Mix Benefits
Central Garden & Pet’s Pet segment turned in steady growth and a sharp improvement in profitability. The Pet segment generated net sales of $477 million, beating our estimate of $445.4 million and increasing 5% year over year from $454 million. Growth was primarily driven by continued strength in Dog & Cat, and Animal Health categories, along with outdoor cushion shipments shifting from the first quarter into the second. The company also reported market share gains in rawhide, dog treats, flea and tick, pet bird, and professional products.
Operating income for the Pet segment increased significantly to $78 million from $61 million in the prior-year quarter. The operating margin expanded to 16.3% from 13.4%, benefiting from a favorable mix, portfolio optimization, sales leverage and productivity gains. Adjusted EBITDA increased to $89 million from $75 million, while the adjusted EBITDA margin improved to 18.6% from 16.6%.
CENT’s Garden Segment Gains on Shipments & New Listings
The company’s Garden segment delivered strong top-line growth as seasonal dynamics normalized. The Garden segment reported net sales of $429 million, beating our estimate of $393 million and increasing 13% year over year from $380 million. Growth was supported by retailer shipment timing shifts, low retailer inventory levels entering the season, and distribution gains in grass seed and fertilizer categories.
Adjusted EBITDA in the Garden segment rose to $76 million from $69 million in the prior-year quarter. However, the adjusted EBITDA margin declined to 17.7% from 18.2%. Segment operating income was $66 million, up from $59 million and the operating margin remained relatively stable at 15.4% compared with 15.5% a year ago.
CENT Highlights Liquidity & Share Repurchases
Central Garden & Pet ended the quarter with solid balance-sheet flexibility. Cash and cash equivalents totaled $653.2 million compared with $516.7 million in the prior-year period. Long-term debt remained stable at $1.19 billion, while total shareholders’ equity stood at $1.65 billion. Gross leverage improved to 2.8X from 2.9X last year and remained below management’s target of 3-3.5X. The company also reported no outstanding borrowings under its asset-based lending facility at the quarter end.
Cash used in operating activities totaled $50 million during the quarter compared with $47 million in the prior-year period, primarily reflecting seasonal working capital timing. Capital expenditure was approximately $10 million during the quarter. Central also repurchased roughly 110,000 shares for $3.4 million, with $128 million remaining under its current share repurchase authorization.
CENT’s Strategic Initiatives & Operational Updates
During the fiscal second quarter, Central Garden & Pet continued executing its “Cost and Simplicity” agenda aimed at streamlining operations and improving efficiency. The company transitioned its DoMyOwn business into its Covington fulfillment center and consolidated TDBBS manufacturing into its dog and cat platform in New Jersey. Management stated that these initiatives are helping improve speed, lower costs and increase operational flexibility.
The company also announced a partnership with Phillips Pet Food & Supplies to create a nationwide pet distribution platform. Under the agreement, CENT will retain a 20% ownership stake while simplifying its operating structure and increasing focus on branded growth opportunities. Management expects the joint venture to reduce reported revenues in the second half by a low-teen percentage due to the lower-margin nature of the distribution business, though the impacts on earnings are expected to be minimal.
Sneak Peek Into CENT’s Outlook
Management reaffirmed its fiscal 2026 adjusted earnings guidance of $2.70 or better, supported by continued margin discipline, productivity improvements, portfolio optimization initiatives, and targeted investments in innovation and growth categories.
The outlook incorporates assumptions for a competitive and promotional retail environment, value-focused consumer spending trends, tariffs and inflationary pressures across certain commodities. Capital expenditure for fiscal 2026 is expected between $50 million and $60 million, focused on maintenance, productivity and targeted growth initiatives across both operating segments.
CENT Stock Past 3-Month Performance
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Shares of this Zacks Rank #2 (Buy) company have declined 1.9% in the past three months compared with the industry’s decline of 6.5%.
Other Stocks to Consider
We have highlighted three other top-ranked stocks, namely Chefs' Warehouse Holdings, LLC CHEF, Chewy, Inc. CHWY and Darling Ingredients Inc. DAR.
Chefs' Warehouse is a distributor of specialty food products. It currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chefs' Warehouse’s current financial-year earnings and revenues implies growth of 24.7% and 8.3%, respectively, from the year-ago actuals. CHEF delivered a trailing four-quarter average earnings surprise of 28.9%.
Chewy is a pure-play e-commerce company focused on pet products and services spanning food, treats, supplies, medications and broader pet health. It presently has a Zacks Rank #2.
CHWY delivered a trailing four-quarter earnings surprise of 1.5%, on average. The consensus estimate for Chewy’s current fiscal-year sales and earnings indicates growth of 8.6% and 28.4%, respectively, from the year-ago period’s reported figures.
Darling Ingredients is a global company that recycles animal by-products, used cooking oil and food waste into value-added products such as animal feed ingredients, edible fats, biofuel feedstock, fertilizers, pet food ingredients and green energy solutions. It has a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for Darling Ingredients’ current financial-year earnings and revenues implies growth of 552.9% and 7.1%, respectively, from the year-ago actuals. DAR delivered a trailing four-quarter average earnings surprise of 16.1%.
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