Central Garden & Pet Announces Q4 and Fiscal 2022 Financial Results

Central Garden & Pet Company (“Central”), a market leader in the Garden and Pet industries, announced results for its fourth quarter and fiscal year 2022 ended September 24, 2022.

• Fiscal 2022 net sales increased 1% to $3.3 billion

• Fiscal 2022 diluted EPS increased 2% to $2.80

• Initial outlook for fiscal 2023 EPS in the range of $2.60 to $2.80

“Central delivered solid fiscal 2022 results in a challenging environment characterized by poor weather during the peak garden season, high inflation, evolving consumer behavior and unfavorable retailer inventory dynamics. Despite these headwinds, we grew net sales, gross margin, operating income, and EPS versus prior year, and we exceeded the guidance we provided in June,” said Tim Cofer, CEO of Central Garden & Pet. “While the near-term economic outlook remains volatile and likely unfavorable, we remain confident in the fundamental trends that support growth in the Garden and Pet industries, the competitive strength of Central and our Central to Home strategy.”

Fiscal 2022 Results

Net sales were $3.3 billion, an increase of 1% compared to the prior year, driven by the Company’s recent acquisitions. Net sales grew at a 12% three-year CAGR from $2.4 billion in fiscal 2019. Organic net sales decreased 3%.

Net sales for the Pet segment were $1.9 billion, a decrease of 1% compared to a year ago, unfavorably impacted by SKU rationalization and the purposeful decision to exit low-profit private label product lines. Net sales for the Pet segment grew at a 9% three-year CAGR compared to $1.5 billion in fiscal 2019. Net sales for the Garden segment increased 4% to $1.5 billion compared to $1.4 billion in the prior year and at a 17% three-year CAGR compared to $923 million in fiscal 2019.

Despite significant inflationary headwinds across commodities, freight and labor, gross margin increased 30 basis points to 29.7% compared to 29.4% a year ago. The Company was able to offset these headwinds through a combination of pricing actions, favorable product mix and gross productivity efforts.

Operating income of $260 million increased 2% from $254 million in fiscal 2021. Operating margin increased 10 basis points to 7.8% compared to 7.7% a year ago, due to gross margin improvement.

Other expense was $3.6 million compared to $1.5 million in the prior year.

Net interest expense was $58 million, in line with the prior year.

Net income was $152 million, in line with a year ago. Diluted earnings per share grew $0.05 to $2.80 compared to $2.75 in the prior year.

Adjusted EBITDA was $367 million, an increase of 4% compared to $352 million in fiscal 2021.

The effective tax rate for the fiscal year was 23.2% compared to 21.6% in the prior year. The increased effective income tax rate in fiscal 2022 was due primarily to a reduced tax benefit from stock-based compensation compared to the prior year.

Fourth Quarter Fiscal 2022 Results

Net sales decreased 4% to $707 million compared to $739 million in the fourth quarter of fiscal 2021.

Gross margin decreased 60 basis points to 28.2% as the positive effect of pricing actions was more than offset by substantial inflationary cost pressure and lower sales volume.

Operating income was $13 million, an increase of 34% compared to $10 million in the fourth quarter of fiscal 2021. Operating margin was 1.8%, an increase of 50 basis points compared to 1.3% in the prior year quarter.

Other expense was $2.3 million compared to $1.9 million in the fourth quarter of fiscal 2021.

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

This resulted in a net loss of $2.0 million compared to a net loss of $3.0 million in the fourth quarter of fiscal 2021, and a diluted loss per share of $0.04 compared to a diluted loss per share of $0.06 in the prior year quarter.

Adjusted EBITDA was $42 million, up 13% from $38 million in the fourth quarter of fiscal 2021.

Pet Segment Fourth Quarter Fiscal 2022 Results

Net sales for the Pet segment were $440 million, a decrease of 4% compared to the prior year, unfavorably impacted by SKU rationalization and the purposeful decision to exit low-profit private label product lines.

The Pet segment’s operating income was $40 million, an increase of 28% compared to $32 million in the prior year quarter. Operating margin of 9.2% reflected an increase of 230 basis points compared to 6.9% in the fourth quarter of fiscal 2021, driven primarily by lower commercial expense and variable compensation as well as the favorable impact of pricing actions.

Garden Segment Fourth Quarter Fiscal 2022 Results

Net sales for the Garden segment were $268 million, a decrease of 4% compared to the prior year quarter, due to softness across most of the Garden portfolio, partially offset by continued strength in wild bird, packet seeds and grass seed.

The Garden segment’s operating income was $1.8 million compared to $1.1 million in the fourth quarter of fiscal 2021. Operating margin was 0.7%, an increase of 30 basis points compared to 0.4% in the prior year quarter, driven by lower variable compensation compared to the prior year.

Outlook for Fiscal 2023

The Company currently projects fiscal 2023 GAAP EPS in the range of $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 inflationary headwinds. 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 that may close during fiscal 2023.

For the full fourth 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 Garden & Pet 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 of Investor Relations – fedelmann@central.com – (925) 412-6726

Source: Central Garden & Pet Company