Central Garden & Pet Company Q1 FY2025 earnings call

• Strong start to fiscal year with growth in earnings per share and net sales, driven by timing of shipments, favorable weather for garden, and promotional activities for pet. Margins improved due to cost management and easing inflation. Robust e-commerce growth. - Cost and Simplicity program yielding results: New distribution center in Covington, Georgia operational, replacing seven legacy facilities. Safety and productivity enhancements across business units. E-commerce expansion to Easton, Pennsylvania. - Supported animal welfare organizations with pet supplies and cash donations. - Confidence in fiscal 2025 outlook, reaffirming non-GAAP EPS of $2.20 or higher.

Pet: Net sales increased 4% to $427 million. E-commerce accounts for 28% of pet sales, with net sales growing 6% over prior year. Operating income was $51 million, up from $43 million in the prior year, and adjusted EBITDA increased to $61 million compared to $54 million a year ago. Garden: Net sales were $229 million, a 2% increase from a year ago. Garden e-commerce sales grew double digits. Operating income for Garden was $2 million compared to $9 million operating loss in the prior year quarter, and Garden segment adjusted EBITDA was $14 million compared to $2 million in the prior year quarter.

• Reaffirmed fiscal 2025 guidance for non-GAAP EPS of $2.20 or higher. - Expect a softer second quarter than last year due to timing of shipments. - Plan to invest approximately $60 million to $70 million in CapEx this fiscal year. - Guidance assumes currently proposed tariffs but excludes potential impacts from acquisitions, divestitures or restructuring activities during fiscal ‘25.

• Macroeconomic and geopolitical uncertainties such as potential tariffs. - Ongoing consumer pressure and competitive marketplace, including challenges in the brick-and-mortar retail sector. - Volatility from extreme weather patterns in the Garden business.

Q: Bill Chappell asks if the quarter was a pull forward or exactly as expected.

A: Niko Lahanas says it was a combination of timing of shipments, favorable mix, weather, and execution, not exactly pull forward.

Q: Brad Thomas asks about de minimis exemption and impact on Pet category.

A: Niko Lahanas and John Hanson discuss it affecting durable category, with durable declines improving sequentially.

Q: Jim Chartier asks about tariffs and Q2 outlook.

A: Niko Lahanas says margin may not be down, but directionally Q2 not as strong as last Q2, with weather and POS playing roles.

Q: Bob Labick asks about pet durable recovery and M&A environment.

A: John Hanson talks about durables recovering with live animal pick-up and innovation, Niko Lahanas mentions M&A environment has anticipation but no specific deals yet.

Q: Brian McNamara asks about investing in the stock.

A: Niko Lahanas says strong management, balance sheet, and potential for accretive M&A make it exciting.

Q: Andrea Teixeira asks about cost and simplicity savings, tariffs, and Q1 upside.

A: Niko Lahanas and John Hanson discuss cost savings continuing, pricing challenge, and Q1 upside not pull forward but timing.

Q: Rob Rigby asks about cash uses and M&A.

A: Niko Lahanas says uses include M&A, CapEx, demand creation, and stock buybacks.

Q: Carla Casella asks about pet specialty channel.

A: John Hanson says it's challenged due to new pet acquisition traffic.

Q: Hale Holden asks about pet durables and garden pull forward.

A: John Hanson talks about pet durables sequential improvement and J.D. Walker explains garden pull forward was due to shipment timing for spring season setup.