Central Garden & Pet Company Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Fiscal 2025 Achievements: Closed the year with expanded gross margins, record EBITDA, and record earnings per share. Delivered consistent performance while advancing portfolio optimization and maintaining disciplined cost management.
• Cost and Simplicity Agenda: Largely completed multiyear supply chain network design project, closed 16 legacy facilities, and modernized distribution footprint. Streamlined operations and boosted productivity across the organization.
• Fiscal 2026 Outlook: Confident in delivering profitable growth despite global macro environment. Expect non-GAAP earnings per share to be $2.70 or better. Focus on innovation, e-commerce, digital technology, and M&A as a growth lever.

Segment Performance

• Pet Segment: Net sales were $428 million, a decrease of 22% due to closure of UK operations and lower durable sales. Consumables now represent roughly 84% of total Pet segment sales, an all-time high. Non-GAAP operating income was $31 million compared with $35 million. E-commerce represents 27% of total Pet segment sales.
• Garden Segment: Net sales were $250 million, a 7% increase. Benefited from an extended selling season and strong retail execution. Garden e-commerce sales grew at a double-digit rate, surpassing 10% of total segment sales. Non-GAAP operating income came in at $1 million, an increase of $26 million.

Guidance

• Fiscal 2026 non-GAAP earnings per share expected to be $2.70 or better.
• Project incremental year-over-year gross tariff exposure of roughly $20 million over the next twelve months, mostly in the Pet segment, to be offset by pricing, portfolio, and supply chain actions.
• Plan to invest approximately $50 million to $60 million in CapEx for maintenance and productivity initiatives.
• First quarter non-GAAP earnings per share expected to be approximately $0.10 to $0.15.

Risks

• Variable weather conditions affecting sales performance, particularly on the garden side.
• Uncertainties related to tariffs and their impact on costs and pricing.
• Consumer behavior and confidence impacting demand, especially in relation to pricing and income bifurcation.
• Limited M&A deal flow in core categories.

Question and Answer

Q: Operating margin outlook for 2026?

A: Nicholas Lahanas stated they will continue to work on cost and simplicity, expecting to expand margin but noting low-hanging fruit has been picked and product mix impact.

Q: Garden segment spring 2026 outlook?

A: John D. Walker was cautiously optimistic, citing distribution gains but noting weather dependency.

Q: Tariff impact on fourth quarter?

A: Bradley G. Smith said gross tariffs were roughly $7 million to $8 million in the fourth quarter.

Q: Pet ownership trends?

A: John Edward Hanson noted pet ownership trends are stabilizing, with live animal business slightly up in Q4.

Q: Top-line outlook for 2026?

A: Nicholas Lahanas said 2026 is expected to be challenging due to consumer behavior, SKU rationalization, and weather impact.