Central Garden & Pet Announces Q1 Fiscal 2023 Financial Results

Central Garden & Pet Company (“Central” or the “Company”), a market leader in the Pet and Garden industries, announced financial results for its fiscal 2023 first quarter ended December 24, 2022.

“We delivered first quarter results in line with our guidance which anticipated near-term challenges including the residual impact from last year’s poor garden season, higher retailer inventories, softer foot traffic at garden retailers, and broadly higher input costs,” said Tim Cofer, CEO of Central Garden & Pet. “Looking to the rest of the year, we assume a more normal garden season and that inventory dynamics will stabilize, and expect pricing actions and cost control to largely offset inflation. We remain confident in the competitive strength of Central, our team’s ability to perform in this difficult environment and the long-term trends supporting growth in the Pet and Garden industries.”

Fiscal 2023 First Quarter Financial Results

Net sales were $628 million compared to $661 million a year ago, a decline of 5%.

Gross margin was 27.4% compared to 30.0% a year ago. The decline was driven primarily by the Garden segment largely due to cost inflation and unfavorable overhead absorption due to lower sales, partially offset by pricing actions.

Operating income was $0.4 million compared to $26 million a year ago, and operating margin was 0.1% compared to 4.0% in the prior year. The operating margin decline was primarily driven by the Garden segment largely due to cost inflation and overhead absorption pressures from lower sales, partially offset by lower commercial spend.

Net interest expense of $14 million was in line with the prior year quarter.

The Company’s net loss was $8 million compared to net income of $9 million a year ago. Loss per share was $0.16 compared to earnings per share of $0.16 in the prior year quarter. Adjusted EBITDA was $29 million compared to $52 million a year ago.

The Company’s effective tax rate was 24.2% compared to 20.7% in the prior year quarter.

Pet Segment Fiscal 2023 First Quarter Results

Net sales for the Pet segment were $416 million compared to $436 million in the prior year, a decline of 5%. The decline was largely driven by the Company’s decision to discontinue low-profit private label product lines, and lower demand for durable pet products, particularly in Aquatics.

Pet segment operating income was $40 million compared to $45 million a year ago, and operating margin was 9.5% compared to 10.4%. The decline in operating margin was mainly driven by inflation and lower sales, partially offset by pricing actions. Pet segment adjusted EBITDA was $50 million compared to $55 million a year ago.

Garden Segment Fiscal 2023 First Quarter Results

Net sales for the Garden segment were $212 million compared to $225 million a year ago, a decline of 6%. Lower sales in Controls & Fertilizer were partially offset by strength in Wild Bird and Grass Seed. Net sales were unfavorably impacted by higher inventories at retail and lower foot traffic compared to a year ago.

Garden segment operating loss was $11 million compared to operating income of $6 million, and operating margin was (5.1)% compared to 2.7% a year ago. The decline in operating margin was mainly driven by inflation and the impact of lower sales partially offset by pricing actions. Garden segment adjusted EBITDA was $22 thousand compared to $16 million in the prior year quarter.

Additional Information

The Company’s cash balance at the end of the quarter was $88 million compared to $296 million a year ago, driven by inventory build over the last 12 months. Cash used by operations during the quarter was $63 million compared to $92 million a year ago. The decrease in cash used by operations was driven primarily by lower working capital requirements.

Total debt as of December 24, 2022 and December 25, 2021 was $1.2 billion. The Company’s leverage ratio, as defined in the Company’s credit agreement, at the end of the first quarter was 3.1x compared to 2.9x at the end of the prior year quarter. The Company repurchased approximately 251,000 shares or $9 million of its stock during the quarter.

Fiscal 2023 Guidance

The Company continues to expect fiscal 2023 EPS to be $2.60 to $2.80. This outlook reflects the macroeconomic uncertainty, further cost inflation, evolving consumer behavior and unfavorable retailer inventory dynamics. The outlook includes anticipated pricing actions and productivity initiatives across the Company’s portfolio to help mitigate inflation. The Company expects fiscal 2023 capital spending to be significantly below fiscal 2022 levels. Fiscal 2023 will have 53 weeks compared to 52 weeks in fiscal 2022. This outlook does not include the impact of any acquisitions or restructuring activities that may occur during fiscal 2023.

For the full first quarter results, click here.

About Central Garden & Pet

Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA) understands that home is central to life and has proudly nurtured happy and healthy homes for over 40 years. With fiscal 2022 net sales of $3.3 billion, Central is on a mission to lead the future of the Pet and Garden industries. The Company’s innovative and trusted products are dedicated to helping lawns grow greener, gardens bloom bigger, pets live healthier and communities grow stronger. Central is home to a leading portfolio of more than 65 high-quality brands including Amdro®, Aqueon®, Cadet®, Farnam®, Ferry~Morse®, Four Paws®, Kaytee®, K&H®, Nylabone® and Pennington®, strong manufacturing and distribution capabilities and a passionate, entrepreneurial growth culture. Central is based in Walnut Creek, California and has over 7,000 employees across North America and Europe. Visit www.central.com to learn more.

Contact:

Friederike Edelmann – VP, Investor Relations – fedelmann@central.com – (925) 412-6726

Source: Central Garden & Pet Company