Why Is Central Garden (CENT) Down 5.6% Since Last Earnings Report?

It has been about a month since the last earnings report for Central Garden (CENT). Shares have lost about 5.6% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Central Garden due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Central Garden & Pet Posts Narrower-Than-Expected Q4 Loss

Central Garden & Pet delivered its fourth-quarter fiscal 2025 results, wherein both the top and bottom lines beat the Zacks Consensus Estimate and improved from the year-ago period. The quarter capped a record fiscal year for the company, highlighted by expanding gross margin, robust profit growth in both Pet and Garden segments and strengthened cash flow. Management reiterated confidence heading into fiscal 2026, supported by operational momentum and a solid balance sheet.

CENT’s Q4 Performance: Key Metrics & Insights

Central Garden & Pet posted an adjusted loss of 9 cents a share, which beat the Zacks Consensus Estimate of a loss of 20 cents. The figure also improved from the 18-cent loss reported in the prior-year quarter. Margin expansion and disciplined execution under its Cost and Simplicity program supported bottom-line performance.

Net sales totaled $678.2 million, rising 1% year over year and beating the Zacks Consensus Estimate of $666 million. The increase was primarily driven by strong performance in the Garden segment, which benefited from favorable weather conditions and an extended selling season. These gains helped offset ongoing pressure in pet durables as well as the strategic wind-down of U.K. operations.

Gross profit rose to $196.5 million from $169 million a year ago, while the gross margin expanded 380 basis points to 29%, primarily due to lapping last year’s grass seed inventory impairment and improved productivity. On an adjusted basis, the gross margin expanded 310 basis points to 29.1%.

Central reported an operating loss of $6.4 million, significantly better than the $32.4 million loss reported a year earlier. The adjusted operating loss improved to $0.6 million from $11.4 million, reflecting stronger gross margin performance partially offset by the timing of investments related to productivity and commercial initiatives. Adjusted EBITDA increased to $25.7 million, up from $16.8 million in the year-ago period. 

CENT’s Segment-Wise Performance Snapshot

The Pet segment generated $428 million in sales, down 2% year over year, reflecting the planned closure of U.K. operations and reduced sales of lower-margin durable products. Despite these headwinds, Pet delivered share gains across multiple consumables categories, including dog chews, flea & tick, equine and pet bird nutrition. Consumables rose to 84% of Pet sales, the highest mix in company history. E-commerce represented 27% of the Pet segment sales.

The segment’s adjusted operating income was $30.6 million compared with $34.6 million a year ago, with operating margin contracting to 7.2% from 8%. The decline reflected slightly lower volumes and the cadence of productivity investments. Adjusted EBITDA totaled $40.6 million, down from $45.4 million in the prior-year quarter.

The Garden segment delivered a strong rebound, with net sales rising 7% to $250 million, up from $234 million last year. The company saw standout performance in its wild bird, grass seed, fertilizer and packet seed categories, with meaningful gains in both sales and market share across key retailers and channels. E-commerce demand in the Garden segment surged, delivering double-digit growth across all categories and pushing online sales to more than 10% of the segment’s total for the first time.

Garden achieved an adjusted operating income of $1 million, a sharp improvement from a $24.9 million operating loss last year, driven by the absence of last year's inventory impairment and ongoing productivity execution. Adjusted EBITDA rose to $11.3 million, up from a loss of $13.5 million.

CENT’s Financial Health Snapshot

Central Garden & Pet ended the quarter with cash and cash equivalents of $882.5 million, long-term debt of $1,191.6 million and shareholders’ equity of $1,583.3 million, excluding the non-controlling interest of $1.7 million. The gross leverage ratio was 2.8, below the company’s 3-3.5 target range. Cash provided by operating activities was $332.5 million in fiscal 2025 compared with $394.9 million last year. 

During the quarter, the company did not repurchase any shares, with $46.5 million remaining under the share repurchase authorization.

Sneak Peek Into CENT’s Outlook

Central Garden & Pet anticipates fiscal 2026 adjusted earnings of $2.70 per share or better, supported by continued margin discipline, pricing actions, cost efficiencies and portfolio optimization designed to offset tariffs and inflationary pressures. Management expects the retail backdrop to remain promotionally active. Strategic investments will center on innovation, productivity, digital technology and data/AI enablement, with capital expenditures projected between $50 million and $60 million. 

For the first quarter of fiscal 2026, the company projects earnings in the band of 10-15 cents a share, down from 21 cents reported in the year-ago period.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -46.97% due to these changes.

VGM Scores

At this time, Central Garden has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a score of A on the value side, putting it in the top quintile for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Central Garden has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Central Garden belongs to the Zacks Consumer Products - Discretionary industry. Another stock from the same industry, Spectrum Brands (SPB), has gained 1.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2025.

Spectrum reported revenues of $733.5 million in the last reported quarter, representing a year-over-year change of -5.2%. EPS of $2.61 for the same period compares with $0.97 a year ago.

Spectrum is expected to post earnings of $0.77 per share for the current quarter, representing a year-over-year change of -24.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -13.5%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Spectrum. Also, the stock has a VGM Score of A.

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This article originally published on Zacks Investment Research (zacks.com).

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