Central Garden & Pet Announces Q3 Fiscal 2022 Results
Central Garden & Pet Company (“Central”), a market leader in the Garden and Pet industries, announced financial results for its fiscal 2022 third quarter ended June 25, 2022.
“In the face of a challenging environment, Central delivered third quarter EPS two cents above the prior year quarter,” said Tim Cofer, CEO of Central Garden & Pet. “Despite softness in the garden segment due to unfavorable weather, evolving consumer behavior, reduced foot traffic and changing retailer inventory expectations, our team continued to execute well during the quarter. We remain confident in our Central to Home strategy and will make purposeful investments to capture opportunities in the pet and garden industries that will drive profitable long-term growth.”
Third Quarter Fiscal 2022 Financial Results
Net sales decreased 2% to $1,015 million compared to $1,037 million a year ago primarily due to softness in the garden segment. Organic net sales decreased 5% compared to the prior year quarter.
Gross margin of 30.3% was 60 basis points below prior year, as pricing and productivity improvements were more than offset by cost inflation in commodities, freight and labor, and unfavorable product mix.
Operating income of $114 million grew 1% compared to $113 million in the prior year. Operating margin increased 30 basis points to 11.2% despite continued inflation and heightened investment spending.
Net interest expense was $14 million compared to $13 million a year ago.
The Company’s net income was $75 million, a decrease of 1% from $76 million a year ago. Diluted GAAP earnings per share for the quarter increased $0.02 to $1.39 from $1.37 in the prior year quarter. Adjusted EBITDA of $141 million was in line with $141 million a year ago.
The Company’s effective tax rate was 23.7% compared to 22.5% in the prior year quarter.
Garden Segment Third Quarter Fiscal 2022 Results
Net sales for the Garden segment decreased 4% to $511 million from $529 million a year ago as contributions from the Company’s fourth quarter 2021 D&D acquisition were more than offset by a decline in organic sales of 8%. Unfavorable weather impacted the majority of the Company’s garden business other than wild bird. On a two-year compound annualized growth rate basis, organic Garden segment sales increased 14% in the third quarter.
Garden segment operating income increased 13% to $76 million driven by the strong performance of recent acquisitions. Operating margin grew 210 basis points to 14.8%, mainly driven by contributions from recent acquisitions and improved pricing, partially offset by inflationary pressures and heightened investment spending. Garden segment adjusted EBITDA increased 9% to $85 million from $78 million in the prior year quarter.
Pet Segment Third Quarter Fiscal 2022 Results
Net sales for the Pet segment of $505 million were largely in line with prior year sales of $508 million, with notable contributions from the Company’s dog & cat treats and toys and outdoor cushion businesses, offset by reduced sales of pet beds primarily due to SKU rationalization.
Pet segment operating income decreased 12% to $63 million, and operating margin declined 160 basis points to 12.4%. Pet segment adjusted EBITDA decreased 9% to $72 million from $80 million a year ago, largely driven by inflationary headwinds and heightened investment spending, partially offset by improved pricing.
The Company’s cash balance at the end of the quarter was $196 million compared to $517 million a year ago.
Cash provided by operations during the quarter was $190 million compared to $299 million a year ago. The decrease in cash provided by operations was primarily due to changes in working capital driven in part by management’s decision to maintain adequate inventory levels to combat a challenged supply chain as well as higher cost of inventory in this inflationary environment.
Total debt was $1.2 billion as of June 25, 2022 and June 26, 2021. The Company’s leverage ratio(1) was 2.9x at the end of the third quarter and at the end of the prior year quarter. The Company repurchased approximately 542 thousand shares or $22.1 million of its stock during the quarter.
Fiscal 2022 Guidance
As indicated in our press release dated June 22, 2022, the Company expects fiscal 2022 GAAP EPS to be at or above prior year. The outlook takes into account increasing costs for commodities and freight, exacerbated by the current geopolitical environment, labor and a return to more normalized consumer demand patterns following extraordinary demand spanning two fiscal years. 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 complete press release, 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.
Friederike Edelmann – VP, Investor Relations – email@example.com – (925) 412-6726
Source: Central Garden & Pet Company