Central Garden & Pet Announces Q2 Fiscal 2023 Financial Results

Central Garden & Pet Company (NASDAQ: CENT) (NASDAQ: CENTA) (“Central”), a market leader in the Pet and Garden industries, today announced its second quarter fiscal 2023 financial results for the period ended March 25, 2023.

“Consistent with what we shared last month, Central delivered second quarter earnings per share of $0.90 in the face of softness across our garden portfolio. The garden category was impacted by a later start to the season, lighter foot traffic and unfavorable retailer inventory dynamics, while the pet segment expanded market share and performed largely as planned,” said Tim Cofer, CEO of Central Garden & Pet. “In line with our original outlook, we expect earnings per share growth in the second half of the year. In addition to short-term actions to cut controllable costs, we are progressing a multi-year cost and simplicity program to reduce complexity, improve margins, and elevate our brands.”

Fiscal 2023 Second Quarter Financial Results

Net sales were $909 million compared to $954 million a year ago, a decline of 5%.

Gross margin was 28.6% compared to 30.1% a year ago. The gross margin decline was driven by the Garden segment due to unfavorable overhead absorption in key garden businesses and input cost pressures.

Operating income was $78 million compared to $107 million a year ago, and operating margin was 8.6% compared to 11.2% in the prior year. The operating margin decline was largely driven by the Garden segment primarily due to overhead absorption pressures.

Net interest expense of $15 million was in line with the prior year quarter.

The Company’s net income was $48 million compared to $70 million a year ago. Earnings per share was $0.90 compared to $1.27 in the prior year quarter. Adjusted EBITDA was $107 million compared to $131 million a year ago.

The Company’s effective tax rate was 23.9% compared to 23.4% in the prior year quarter.

Pet Segment Fiscal 2023 Second Quarter Results

Net sales for the Pet segment were $475 million compared to $498 million in the prior year, a decline of 5%. Lower sales in Outdoor Cushions, the Company’s decision to discontinue certain low-profit private label pet bed product lines and lower demand for durable pet products were partially offset by strength in Dog & Cat Treats & Toys.

Pet segment operating income was $55 million compared to $61 million a year ago, and operating margin was 11.6% compared to 12.2%. The decline in operating margin was mainly due to lower sales. Pet segment adjusted EBITDA was $66 million compared to $70 million a year ago.

Garden Segment Fiscal 2023 Second Quarter Results

Net sales for the Garden segment were $434 million compared to $457 million a year ago, a decline of 5%. Lower sales in Grass Seed, Controls & Fertilizer and Live Goods were partially offset by strength in Wild Bird and Packet Seed. Net sales were unfavorably impacted by poor spring weather resulting in lower foot traffic, and changes in retailer buying patterns.

Garden segment operating income was $50 million compared to $71 million a year ago, and operating margin was 11.4% compared to 15.4%. The decline in operating margin was mainly due to lower sales, input cost inflation, and initial start-up costs associated with a recently acquired live goods facility. Garden segment adjusted EBITDA was $60 million compared to $78 million in the prior year quarter.

Additional Information

The Company’s cash balance at the end of the quarter was $61 million compared to $54 million a year ago. Cash used by operations during the quarter was $34 million compared to $180 million a year ago. The decrease in cash used by operations was driven primarily by lower working capital requirements.

Total debt as of March 25, 2023 and March 26, 2022 was $1.2 billion. The Company’s leverage ratio, as defined in the Company’s credit agreement, at the end of the second quarter was 3.3x compared to 2.9x at the end of the prior year quarter. The Company repurchased approximately 75,000 shares or $2.7 million of its stock during the quarter.

Cost and Simplicity Program

The Company will provide on its earnings call details related to its multi-year cost and simplicity program consisting of a pipeline of projects across a number of key areas including procurement, manufacturing, logistics, portfolio management and administrative costs.

Fiscal 2023 Guidance

The Company expects fiscal 2023 EPS of $2.35 or better. This outlook reflects the macroeconomic uncertainty, cost inflation, evolving consumer behavior and unfavorable retailer inventory dynamics, as well as pricing actions and productivity initiatives across the Company’s portfolio. The Company anticipates capital spending significantly below fiscal 2022 levels. Fiscal 2023 will have 53 weeks compared to 52 weeks in fiscal 2022. This outlook excludes the impact of any acquisitions or restructuring activities that may occur during fiscal 2023, including any projects under the cost and simplicity program.

For the complete press release, 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 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, Investor Relations – fedelmann@central.com – (925) 412-6726

Source: Central Garden & Pet Company