Central Garden & Pet Announces Q1 Fiscal 2024 Financial Results

Fiscal 2024 Q1 net sales of $635 million

Fiscal 2024 Q1 earnings per share of $0.01

Maintains outlook for fiscal 2024 non-GAAP EPS of $2.50 or better

Central Garden & Pet Company (“Central”), a market leader in the Pet and Garden industries, announced financial results for its fiscal 2024 first quarter ended December 30, 2023.

“The fiscal year is off to a solid start as we successfully navigated the challenging external environment. We delivered earnings per share of $0.01 as a result of improved gross margin and early season shipments,” said Beth Springer, Interim CEO of Central Garden & Pet. “Our outlook for the fiscal year is unchanged, and we are focused on executing our long-term Central to Home strategy with excellence.”

Fiscal 2024 First Quarter Financial Results

Net sales were $635 million compared to $628 million a year ago, an increase of 1%. Organic net sales increased 1%.

Gross profit was $179 million compared to $172 million in the prior year. Gross margin improved 80 basis points to 28.2% compared to 27.4% driven by cost management and moderating inflation.

Operating income was $8 million compared to $0.4 million a year ago. Operating margin was 1.3% compared to 0.1%, an increase of 120 basis points driven by higher gross margin and cost management resulting in lower SG&A as a percentage of net sales.

Net interest expense was $10 million compared to $14 million a year ago driven by higher cash balances and interest rates.

Net income was $0.4 million compared to net loss of $8 million a year ago. Earnings per share were $0.01 compared to loss per share of $0.16, an increase of $0.17 cents. Adjusted EBITDA was $37 million compared to $29 million a year ago.

The effective tax rate was 287.7% compared to 24.2% in the prior year due to a benefit from a discrete item related to stock compensation in the current year quarter.

Pet Segment Fiscal 2024 First Quarter Results

Net sales for the Pet segment were $409 million compared to $416 million in the prior year, a decrease of 2% due to lower sales of durable pet products. Organic net sales decreased 5% excluding the impact of the recent acquisition of TDBBS.

Pet segment operating income was $43 million compared to $40 million a year ago, an increase of 10%. Operating margin was 10.6% compared to 9.5%, an increase of 110 basis points driven by the positive results of Central’s Cost and Simplicity program and lower commercial spend. Pet segment adjusted EBITDA was $54 million compared to $50 million in the prior year.

Garden Segment Fiscal 2024 First Quarter Results

Net sales for the Garden segment were $225 million compared to $212 million a year ago, an increase of 6% driven by early season shipments in Controls & Fertilizer, Grass, and Packet Seeds. Organic net sales increased 11% excluding the impact of the sale of the independent garden channel distribution business.

Garden segment operating loss was $9 million compared to operating loss of $11 million in the prior year, an improvement of 18%. Operating margin was (3.9)% compared to (5.1)%, an improvement of 120 basis point driven by gross margin improvement and favorable overhead absorption, partially offset by higher commercial spend. Garden segment adjusted EBITDA was $2 million compared to $0.02 million a year ago.

Additional Information

The cash balance at the end of the quarter was $341 million compared to $88 million a year ago, driven by a reduction in inventory due to converting inventory to cash over the last 12 months. Cash used by operations during the quarter was $70 million compared to $63 million a year ago.

Total debt as of December 30, 2023, and December 24, 2022 was $1.2 billion. The leverage ratio, as defined in Central’s credit agreement, at the end of the first quarter was 3.0x compared to 3.1x at the end of the prior year quarter. Central repurchased 39,576 shares or $1.4 million of its stock during the quarter.

Fiscal 2024 Guidance

Central continues to expect fiscal 2024 non-GAAP EPS to be $2.50 or better before the impact of the stock dividend taking place on February 8, 2024.

This outlook reflects an environment of macroeconomic and geopolitical uncertainty with deflationary pressure in some of Central’s commodity businesses and uncertain consumer demand and retailer dynamics. It includes modest pricing actions to help mitigate inflationary headwinds. This outlook excludes the impact of any acquisitions, divestitures or restructuring activities that may occur during fiscal 2024, including any projects under the Cost and Simplicity program. It also excludes the impact from the recent TDBBS acquisition. Central expects fiscal 2024 capital spending to be approximately $70 million.

Stock Dividend

On December 11, 2023, Central’s board of directors declared a stock dividend in the form of one share of Central’s Class A Common Stock for every four outstanding shares of Central’s Common Stock, Class A Common Stock and Class B Stock to enhance liquidity in its Class A Common Stock. Dividend shares of Class A Common Stock will be distributed on February 8, 2024 to stockholders of record on January 8, 2024. The Class A Common Stock is listed on the NASDAQ Global Select Market under the symbol “CENTA.”

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 2023 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 6,700 employees across North America and Europe. Visit www.central.com to learn more.

Contact:

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

Source: Central Garden & Pet Company