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Central Garden & Pet (CENT) Q3 Earnings Beat, Organic Sales Fall
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Central Garden & Pet Company (CENT - Free Report) came up with third-quarter fiscal 2024 results, with revenues falling short of the Zacks Consensus Estimate, although earnings surpassed the same. However, both the top and bottom lines declined year over year.
Nonetheless, management has been actively strengthening its position in the pet and lawn and garden supplies space. The company focuses on brand building, containing costs, reducing complexity and improving margins. The company’s Cost and Simplicity program contributed to gross margin expansion during the quarter.
Let’s Delve Deeper
Central Garden & Pet reported adjusted quarterly earnings of $1.32 per share, which beat the Zacks Consensus Estimate of $1.25. However, the bottom line declined from the year-ago period’s earnings of $1.40 per share.
The company generated net sales of $996.3 million, which came below the Zacks Consensus Estimate of $1,008 million. The metric declined 2.6% from the year-ago period. Organic net sales decreased 3%.
The adjusted gross profit came in at $325.7 million compared with $326.1 million reported in the year-ago period. The adjusted gross margin expanded 80 basis points to 32.7%, driven by the Cost and Simplicity program, as well as moderating inflation.
Adjusted SG&A expenses of $198.6 million increased from $189.3 million in the prior-year quarter. As a percentage of net sales, it deleveraged 140 basis points to 19.9%. We had anticipated SG&A expenses to deleverage 100 basis points.
The adjusted operating income totaled $127.1 million, down from the $136.8 million reported in the year-ago period. The operating margin shrunk 60 basis points to 12.8%. Adjusted EBITDA came in at $156 million compared with $165.8 million in the prior-year period.
Central Garden & Pet Company Price, Consensus and EPS Surprise
Net sales for the Pet segment came in at $508 million, reflecting a 0.9% increase compared to the previous year, driven by growth in Consumables businesses and the recent TDBBS acquisition. Organic net sales fell 2.2%, excluding the impact of the recent buyout of TDBBS.
The segment’s adjusted operating income came in at $83.1 million, up from $73.9 million reported in the prior-year quarter. Meanwhile, the adjusted operating margin expanded 170 basis points to 16.4%, driven by the improved gross margin.
In the Garden segment, net sales of $488.3 million declined 6.1% from the year-ago period. Organic net sales fell 3.7%, excluding the impact of the sale of the independent garden channel distribution business. Unfavorable weather adversely impacted sales across the garden categories, primarily live plants.
The segment’s adjusted operating income of $73.6 million declined from an adjusted operating income of $88.1 million reported in the prior year quarter. The adjusted operating margin shrunk 180 basis points to 15.1%, driven by lower sell-through in live plants.
Financial Details
Central Garden & Pet ended the quarter with cash and cash equivalents of $570.4 million, long-term debt of $1,189.4 million and shareholders’ equity of $1,593.6 million, excluding the non-controlling interest of $2.1 million.
Outlook
Central Garden & Pet continues to estimate fiscal 2024 adjusted earnings to be $2.00 per share or better ($2.50 or better before the February 2024 stock dividend) despite anticipating a one-time charge of $15-20 million in the fourth quarter. The projection indicates uncertain consumer demand, shifting retailer dynamics, and ongoing macroeconomic and geopolitical challenges. Additionally, management now expects capital expenditures for fiscal 2024 to be around $60 million.
Shares of this Zacks Rank #4 (Sell) company have declined 18.3% in the past three months against the industry’s growth of 1.7%.
Stocks Hogging in the Limelight
Chewy, Inc. (CHWY - Free Report) , a trusted destination for pet parents and partners everywhere, currently sports a Zacks Rank #1 (Strong Buy). CHWY has a trailing four-quarter earnings surprise of 57.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chewy’s current financial-year sales and earnings suggests growth of around 5.5% and 39.1%, respectively, from the year-ago reported numbers.
Sprouts Farmers (SFM - Free Report) , which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1. SFM has a trailing four-quarter earnings surprise of 12%, on average.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of around 9.6% and 17.3%, respectively, from the year-ago reported numbers.
Walmart (WMT - Free Report) , which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). WMT has a trailing four-quarter earnings surprise of 8.3%, on average.
The Zacks Consensus Estimate for Walmart’s current financial-year sales and earnings calls for growth of around 4.3% and 9.5%, respectively, from the year-ago reported numbers.
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Central Garden & Pet (CENT) Q3 Earnings Beat, Organic Sales Fall
Central Garden & Pet Company (CENT - Free Report) came up with third-quarter fiscal 2024 results, with revenues falling short of the Zacks Consensus Estimate, although earnings surpassed the same. However, both the top and bottom lines declined year over year.
Nonetheless, management has been actively strengthening its position in the pet and lawn and garden supplies space. The company focuses on brand building, containing costs, reducing complexity and improving margins. The company’s Cost and Simplicity program contributed to gross margin expansion during the quarter.
Let’s Delve Deeper
Central Garden & Pet reported adjusted quarterly earnings of $1.32 per share, which beat the Zacks Consensus Estimate of $1.25. However, the bottom line declined from the year-ago period’s earnings of $1.40 per share.
The company generated net sales of $996.3 million, which came below the Zacks Consensus Estimate of $1,008 million. The metric declined 2.6% from the year-ago period. Organic net sales decreased 3%.
The adjusted gross profit came in at $325.7 million compared with $326.1 million reported in the year-ago period. The adjusted gross margin expanded 80 basis points to 32.7%, driven by the Cost and Simplicity program, as well as moderating inflation.
Adjusted SG&A expenses of $198.6 million increased from $189.3 million in the prior-year quarter. As a percentage of net sales, it deleveraged 140 basis points to 19.9%. We had anticipated SG&A expenses to deleverage 100 basis points.
The adjusted operating income totaled $127.1 million, down from the $136.8 million reported in the year-ago period. The operating margin shrunk 60 basis points to 12.8%. Adjusted EBITDA came in at $156 million compared with $165.8 million in the prior-year period.
Central Garden & Pet Company Price, Consensus and EPS Surprise
Central Garden & Pet Company price-consensus-eps-surprise-chart | Central Garden & Pet Company Quote
Segment Details
Net sales for the Pet segment came in at $508 million, reflecting a 0.9% increase compared to the previous year, driven by growth in Consumables businesses and the recent TDBBS acquisition. Organic net sales fell 2.2%, excluding the impact of the recent buyout of TDBBS.
The segment’s adjusted operating income came in at $83.1 million, up from $73.9 million reported in the prior-year quarter. Meanwhile, the adjusted operating margin expanded 170 basis points to 16.4%, driven by the improved gross margin.
In the Garden segment, net sales of $488.3 million declined 6.1% from the year-ago period. Organic net sales fell 3.7%, excluding the impact of the sale of the independent garden channel distribution business. Unfavorable weather adversely impacted sales across the garden categories, primarily live plants.
The segment’s adjusted operating income of $73.6 million declined from an adjusted operating income of $88.1 million reported in the prior year quarter. The adjusted operating margin shrunk 180 basis points to 15.1%, driven by lower sell-through in live plants.
Financial Details
Central Garden & Pet ended the quarter with cash and cash equivalents of $570.4 million, long-term debt of $1,189.4 million and shareholders’ equity of $1,593.6 million, excluding the non-controlling interest of $2.1 million.
Outlook
Central Garden & Pet continues to estimate fiscal 2024 adjusted earnings to be $2.00 per share or better ($2.50 or better before the February 2024 stock dividend) despite anticipating a one-time charge of $15-20 million in the fourth quarter. The projection indicates uncertain consumer demand, shifting retailer dynamics, and ongoing macroeconomic and geopolitical challenges. Additionally, management now expects capital expenditures for fiscal 2024 to be around $60 million.
Shares of this Zacks Rank #4 (Sell) company have declined 18.3% in the past three months against the industry’s growth of 1.7%.
Stocks Hogging in the Limelight
Chewy, Inc. (CHWY - Free Report) , a trusted destination for pet parents and partners everywhere, currently sports a Zacks Rank #1 (Strong Buy). CHWY has a trailing four-quarter earnings surprise of 57.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chewy’s current financial-year sales and earnings suggests growth of around 5.5% and 39.1%, respectively, from the year-ago reported numbers.
Sprouts Farmers (SFM - Free Report) , which is engaged in the retailing of fresh, natural and organic food products, currently sports a Zacks Rank #1. SFM has a trailing four-quarter earnings surprise of 12%, on average.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings implies growth of around 9.6% and 17.3%, respectively, from the year-ago reported numbers.
Walmart (WMT - Free Report) , which operates a chain of hypermarkets, discount department stores and grocery stores, currently carries a Zacks Rank #2 (Buy). WMT has a trailing four-quarter earnings surprise of 8.3%, on average.
The Zacks Consensus Estimate for Walmart’s current financial-year sales and earnings calls for growth of around 4.3% and 9.5%, respectively, from the year-ago reported numbers.