Central Garden & Pet Announces Q2 Fiscal 2022 Results

Central Garden & Pet Company (“Central” or the “Company”), a market leader in the garden and pet industries, announced financial results for its fiscal 2022 second quarter ended March 26, 2022.

“Central delivered another solid quarter thanks to strong execution by our team in this challenging inflationary environment,” said Tim Cofer, CEO of Central Garden & Pet. “Despite the ongoing headwinds, we grew sales and operating income, and importantly, expanded gross margin, and remain on track to deliver our fiscal 2022 financial targets. We continue to make purposeful investments to drive profitable long-term growth.”

Fiscal 2022 Second Quarter Financial Results

Net sales increased 2% to $954 million compared to $935 million a year ago, driven by recent acquisitions, which contributed $52 million to the quarter. Organic net sales decreased 3.5% compared to the prior year quarter.

Gross margin was 30.1%, an increase of 100 basis points compared to a year ago, driven primarily by pricing as well as favorable product mix and productivity improvements, partially offset by cost inflation in commodities, freight and labor.

Operating income increased 2% to $107 million from $105 million a year ago. Operating margin of 11.2% was in line with the prior year despite continued inflation and heightened investment spending.

Net interest expense was $15 million compared to $10 million a year ago primarily due to higher debt outstanding.

The Company’s net income was $70 million, a decrease of 4% from $73 million a year ago. Diluted GAAP earnings per share for the quarter was $1.27, a decrease of $0.05 compared to the prior year quarter. Adjusted EBITDA increased 2% to $131 million from $129 million a year ago.

The Company’s effective tax rate was 23.4% compared to 22.7% in the prior year quarter.

Garden Segment Fiscal 2022 Second Quarter Results

Net sales for the Garden segment increased 3% to $457 million driven by contributions from recent acquisitions offsetting a decline in organic sales of 9%. Organic strength in wild bird was more than offset by declines in chemicals & fertilizer, garden distribution, controls and grass seed, driven by unfavorable weather causing a late start to the garden season. On a two-year compound annualized growth rate basis, organic Garden segment sales increased 17% in the second quarter.

Garden segment operating income increased 7% to $71 million driven by the strong performance of recent acquisitions. Operating margin grew 50 basis points to 15.4%, mainly driven by contributions from recent acquisitions and improved pricing, partially offset by inflationary pressures and heightened investment spending. Garden segment adjusted EBITDA increased 5% to $78 million from $75 million in the prior year quarter.

Pet Segment Fiscal 2022 Second Quarter Results

Net sales for the Pet segment increased 1% to $498 million, with notable contributions from the Company’s dog and cat, outdoor cushions, professional and pet distribution businesses, offset by softness in pet beds.

Pet segment operating income decreased 2% to $61 million, and operating margin declined 40 basis points to 12.2%. Pet segment adjusted EBITDA decreased 1% to $70 million from $71 million a year ago, largely driven by inflationary headwinds and heightened investment spending, partially offset by improved pricing and favorable product mix.

Additional Information

The Company’s cash balance at the end of the quarter was $54 million compared to $40 million a year ago. Cash used by operations during the quarter was $180 million compared to $84 million a year ago. The increase in cash used by operations was due primarily to changes in working capital, predominantly an increase in inventory resulting from an intentional build-up in inventory due to increased demand for the Company’s products amid the continuing global supply chain issues, as well as increased input costs.

Total debt as of March 26, 2022 was $1.2 billion compared to $1 billion at March 27, 2021. The Company’s leverage ratio⁽¹⁾ at the end of the second quarter was 2.9x compared to 2.5x at the end of the prior year quarter. The Company repurchased approximately 227 thousand shares or $9.4 million of its stock during the quarter.

Fiscal 2022 Guidance

The Company continues to expect fiscal 2022 GAAP EPS to be $3.10 or better. The outlook takes into account increasing costs for commodities and freight, exacerbated by the current geopolitical environment, labor, a return to more normalized consumer demand patterns following extraordinary demand spanning two fiscal years and resuming more historical levels of promotional activity. This guidance further includes anticipated pricing actions across the Company’s portfolio as well as investments in capacity expansion, brand building, consumer insights, innovation and eCommerce to drive sustainable growth. This outlook does not include the impact of acquisitions that may close during fiscal 2022.

For the full second quarter results, click here.

About Central Garden & Pet

Central Garden & Pet (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 2021 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 Pennington, Nylabone, Kaytee, Amdro and Aqueon, strong manufacturing and distribution capabilities and a passionate, entrepreneurial growth culture. Central Garden & Pet is based in Walnut Creek, California and has over 7,000 employees across North America and Europe. For additional information about Central, please visit www.central.com.

Contact:

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

Source: Central Garden & Pet Company