Central Garden & Pet Announces Q3 Fiscal 2024 Financial Results

Fiscal 2024 Q3 net sales of $996 million compared to $1,023 million a year ago

Fiscal 2024 Q3 GAAP EPS of $1.19 vs. $1.25 a year ago, Non-GAAP EPS of $1.32 vs. $1.40 a year ago

Maintains outlook for fiscal 2024 non-GAAP EPS of $2.00 or better ($2.50 or better before the February 2024 stock dividend)

Central Garden & Pet Company (“Central”), a market leader in the Pet and Garden industries, announced financial results for its fiscal 2024 third quarter ended June 29, 2024.

“We delivered a solid third quarter earnings performance, recognizing that we had a record third quarter in 2023,” said Beth Springer, Interim CEO. “Our Cost and Simplicity program continues to prove effective as evidenced in our improved gross margins. Looking ahead, we remain committed to our long-term Central to Home strategy.”

Fiscal 2024 Third Quarter Financial Results

Net sales were $996 million compared to $1,023 million a year ago, a decrease of 3%. Organic net sales also decreased 3%.

Gross profit was $317 million compared to $318 million a year ago. Non-GAAP gross profit of $326 million was in line with the prior year. Gross margin expanded by 70 basis points to 31.8%. On a non-GAAP basis, gross margin expanded by 80 basis points to 32.7% driven by Central’s Cost and Simplicity program and moderating inflation.

Operating income was $116 million compared to $123 million a year ago, a decrease of 6%. Non-GAAP operating income was $127 million compared to $137 million in the prior year. Operating margin was 11.6% compared to 12.0% a year ago. On a non-GAAP basis, operating margin was 12.8% compared to 13.4% in the prior year.

Net interest expense was $10 million compared to $13 million a year ago.

Net income was $80 million compared to $83 million in the prior year, a decrease of 4%. Non-GAAP net income was $88 million compared to $94 million a year ago. Earnings per share were $1.19 compared to $1.25 in the prior year, a decrease of $0.06. Non-GAAP earnings per share were $1.32 compared to $1.40 a year ago. Adjusted EBITDA was $156 million compared to $166 million a year ago.

The effective tax rate was 24.0% compared to 24.4% in the prior year.

Pet Segment Fiscal 2024 Third Quarter Results

Net sales for the Pet segment were $508 million compared to $503 million in the prior year, an increase of 1% driven by the recent TDBBS acquisition and growth in consumable pet products. Organic net sales decreased 2% excluding the impact of TDBBS.

Pet segment operating income was $83 million compared to $60 million a year ago, an increase of 39%. Operating margin expanded by 450 basis points to 16.4% compared to 11.9% driven by improved gross margin. Pet segment adjusted EBITDA was $94 million compared to $84 million in the prior year.

Garden Segment Fiscal 2024 Third Quarter Results

Net sales for the Garden segment were $488 million compared to $520 million a year ago, a decrease of 6%. Organic net sales decreased 4% excluding the impact of the sale of the independent garden channel distribution business.

Garden segment operating income was $63 million compared to $88 million in the prior year, a decrease of 29%. Non-GAAP operating income was $74 million. Operating margin contracted 410 basis points to 12.8% compared to 16.9%. On a non-GAAP basis, operating margin contracted 180 basis points to 15.1% driven by lower sell through in live plants. Garden segment adjusted EBITDA was $85 million compared to $99 million a year ago.

Liquidity and Debt

The cash balance at the end of the quarter was $570 million compared to $333 million a year ago driven by earnings and inventory reduction efforts over the last 12 months.

Cash provided by operations during the quarter was $286 million compared to $325 million a year ago.

Total debt as of June 29, 2024, and June 24, 2023 was $1.2 billion. The gross leverage ratio, as defined in Central’s credit agreement, at the end of the third quarter was 3.0x compared to 3.1x at the end of the prior year quarter.

Cost and Simplicity Program

Central continues to advance its multi-year Cost and Simplicity program consisting of a pipeline of projects across procurement, manufacturing, logistics, portfolio management and administrative costs to simplify its business and improve efficiency across the organization.

In the third quarter of fiscal 2024, Central began winding down its pottery business.

As a result of Cost and Simplicity projects, Central incurred $11.1 million of one-time costs largely related to the pottery exit, including $8.6 million in cost of goods sold and $2.5 million in selling, general and administrative costs, the majority of which was non-cash.

Fiscal 2024 Guidance

Central continues to expect fiscal 2024 non-GAAP EPS to be $2.00 or better ($2.50 or better before the February 2024 stock dividend) despite currently anticipating a one-time charge in the range of $15-20 million in the fourth quarter. Given the recent significant decrease in market prices for grass seed, Central determined in August 2024 it will be necessary to write down the value of its grass seed inventory.

This outlook reflects uncertain consumer demand and retailer dynamics and an environment of macroeconomic and geopolitical volatility. It excludes the impact of any restructuring activities that may occur during the fourth quarter of fiscal 2024, including projects under the Cost and Simplicity program or other one-time non-recurring charges. Central now expects fiscal 2024 capital spending to be approximately $60 million.

For the full third quarter results, click here.

About Central Garden & Pet

Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA) understands 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, with 6,700 employees primarily across North America. 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