CENT Q3 Deep Dive: Cost Discipline, Portfolio Simplification, and E-Commerce Expansion Shape Results

Pet company Central Garden & Pet (NASDAQ:CENT) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 1.3% year on year to $678.2 million. Its non-GAAP loss of $0.09 per share was 54.3% above analysts’ consensus estimates.

Is now the time to buy CENT? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Central Garden & Pet’s third quarter performance saw a favorable market reaction as the company delivered year-over-year revenue growth and outpaced Wall Street’s expectations. Management attributed the positive results to ongoing operational streamlining, portfolio simplification, and efficiency initiatives, particularly within both the Pet and Garden segments. CEO Nicholas Lahanas highlighted the impact of strategic actions such as reducing exposure to low-margin products and consolidating facilities, noting, “We delivered consistent performance while advancing portfolio optimization and maintaining disciplined cost management.” Additionally, growth in areas like wild bird feed and equine products, alongside the increasing role of e-commerce, contributed to the company’s resilient quarter.

Looking forward, Central Garden & Pet’s guidance for the coming year is shaped by ongoing investments in productivity, innovation, and digital capabilities, balanced against external pressures such as tariffs and consumer uncertainty. Management cited plans to further expand margins through targeted pricing and continued cost reductions, while also reinvesting in marketing, technology, and new product launches. Lahanas cautioned, “The top line is going to be challenging…consumer confidence is at a low point right now,” emphasizing the company’s focus on maintaining flexibility in response to shifting demand. The company will also prioritize margin-accretive acquisitions and enhanced e-commerce engagement as key pillars of its growth strategy.

Key Insights from Management’s Remarks

Management pointed to portfolio optimization, cost efficiency, and e-commerce momentum as primary drivers of the latest quarter’s performance, while noting that proactive SKU rationalization and tariff impacts shaped the business environment.

• Portfolio simplification impact: The company continued to reduce exposure to low-margin pet and garden durables, which led to a deliberate decline in certain sales categories but improved overall profitability and focus on core consumables.
• Operational efficiency gains: Facility consolidations and supply chain network redesign have streamlined operations, enabling faster fulfillment and modernized distribution, while cost management initiatives contributed to margin expansion.
• E-commerce advances: E-commerce sales in the Garden segment surpassed 10% of total segment revenue for the first time, supported by digital marketing investments, improved product content, and higher conversion rates across retailer platforms.
• Product innovation and launches: Recent product launches such as the redesigned Pennington wild bird line and Farnam Endure Gold Fly Spray, an EPA-approved equine care product, demonstrated the company’s commitment to bringing new offerings to market and capturing consumer demand.
• Channel and segment trends: The Pet segment benefited from stable consumables demand and share gains in categories like dog chews and flea & tick, while the Garden segment experienced a strong seasonal rebound due to favorable weather and expanded product placements.

Drivers of Future Performance

Management’s outlook for the next year centers on disciplined cost management, pricing actions to offset tariffs, and continued investment in innovation and digital initiatives.

• Tariffs and pricing strategy: The company faces incremental tariff costs, particularly in the Pet segment. Management aims to offset these headwinds through targeted price increases, ongoing portfolio optimization, and supply chain adjustments, noting that consumer response and retailer negotiations remain key uncertainties.
• Margin expansion focus: While much of the easy cost savings have been realized, management expects further—albeit more modest—margin gains through ongoing efficiency projects, SKU rationalization, and reinvestment in growth areas like digital marketing and product innovation.
• Challenging top-line environment: CEO Nicholas Lahanas described the revenue outlook as "extremely challenging," citing persistent consumer caution, macroeconomic headwinds, and continued rationalization of lower-margin SKUs as factors likely to weigh on sales growth. Weather variability, especially for the Garden segment, remains a material risk.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will watch closely for (1) how effectively Central Garden & Pet offsets tariff pressures through pricing and supply chain initiatives; (2) the impact of SKU rationalization and cost management on both margin expansion and top-line stability; and (3) the pace of e-commerce and digital channel growth, particularly in Garden. Execution on new product launches and the ability to identify attractive M&A opportunities will also be important markers of success.

Central Garden & Pet currently trades at $32.60, up from $31.43 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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