CENT Q1 Earnings Beat on Margins, Revenues Miss on Shipment Timing

Central Garden & Pet Company CENT delivered its first-quarter fiscal 2026 results, wherein revenues fell short of the Zacks Consensus Estimate and declined year over year. On the contrary, earnings topped the consensus mark. The quarter reflected improved gross margin and disciplined execution under its Cost and Simplicity program, even as shipment timing, portfolio optimization and macro pressures weighed on sales. Management reaffirmed its fiscal 2026 earnings view.

CENT’s Q1 Performance: Key Metrics & Insights

Central Garden & Pet posted adjusted earnings of 21 cents a share, which beat the Zacks Consensus Estimate of 11 cents and remained flat year over year. 

Net sales totaled $617.4 million, declining 6% year over year and missing the Zacks Consensus Estimate of $644 million. Soft top-line performance was primarily driven by shipment timing in the Garden segment and ongoing portfolio optimization initiatives. These included the rationalization of lower-margin pet durables and select live plants categories, the closure of U.K. operations and the transition of the European business to a more profitable direct-export model.

Gross profit totaled $190.6 million, down 3% year over year, though gross margin expanded 110 basis points to 30.9%. Adjusted gross profit was $190 million, down from $195.7 million in the year-ago period, with adjusted gross margin expanding 100 basis points to 30.8%, on improved productivity and favorable mix. 

Operating income was $16.5 million, down from $28 million in the year-ago quarter. Adjusted operating income came in at $24.3 million, down 13% year over year. We note that adjusted operating margin contracted 40 basis points to 3.9%. Adjusted EBITDA declined to $49.8 million from $55.4 million.

Adjusted SG&A expenses fell 1% to $165.7 million and represented 26.8% of net sales compared with 25.5% a year ago.

Central Garden & Pet Company Price, Consensus and EPS Surprise

Central Garden & Pet Company price-consensus-eps-surprise-chart | Central Garden & Pet Company Quote

CENT’s Segment-Wise Performance Snapshot

The Pet segment generated $416 million in sales, down 3% year over year, primarily reflecting portfolio optimization actions, shipment timing and the closure of U.K. operations. Despite these headwinds, consumables grew at a low single-digit rate, supported by strength in rawhide, animal health, wild bird and professional products. 

The adjusted operating income for the segment was $50.3 million, slightly below last year’s $51.3 million. The adjusted operating margin improved modestly to 12.1%, up from 12% in the prior-year period, aided by a favorable mix and productivity gains. Adjusted EBITDA totaled $60.4 million compared with $61.3 million in the year-ago period.

The Garden segment reported net sales of $202 million, down 12% year over year, largely due to shipment timing, the transition of certain third-party distribution lines, and the rationalization of select live plant categories. These declines were partially offset by continued growth in wild bird, fertilizer and packet seeds, with the company gaining market share across several categories.

The segment posted an adjusted operating loss of $2.4 million compared to adjusted operating income of $2.4 million a year ago. Adjusted EBITDA declined to $7.8 million from $13.5 million in the prior-year quarter, as shipment timing more than offset productivity benefits.

CENT’s Financial Health Snapshot

Central Garden & Pet ended the quarter with cash and cash equivalents of $721.2 million, long-term debt of $1,192.1 million and shareholders’ equity of $1,575.4 million, excluding the non-controlling interest of $0.5 million. The gross leverage ratio was 2.9, below the company’s 3-3.5 target range. Cash used by operating activities was $70.2 million for the quarter compared with $68.8 million in the year-ago period.  

During the quarter, the company repurchased 660,000 shares for $18.5 million, with $28 million remaining under its current authorization. CENT incurred capital expenditure of $11 million in the quarter.

Sneak Peek Into CENT’s Outlook

Management reaffirmed its expectation for fiscal 2026 non-GAAP earnings of $2.70 per share or better, supported by continued margin discipline, cost efficiency initiatives and portfolio optimization. The outlook factors in a promotional retail environment, value-conscious consumers, tariffs and inflationary pressures, while excluding the impact of potential acquisitions or restructuring actions. Capital expenditures for fiscal 2026 are expected in the range of $50-$60 million, focused on productivity, maintenance and targeted growth investments. 

Shares of this Zacks Rank #3 (Hold) company have advanced 12.2% in the past three months compared with the industry’s rise of 18%.

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