Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong growth stocks can be challenging due to inherent volatility and risks [1] Group 1: Company Overview - Central Garden (CENT) is currently highlighted as a recommended growth stock by the Zacks Growth Style Score system, which evaluates a company's genuine growth potential [2] - The company has a favorable Growth Score and a top Zacks Rank, indicating strong investment potential [2] Group 2: Earnings Growth - Earnings growth is a critical factor for growth investors, with double-digit growth being particularly desirable [4] - Central Garden's projected EPS growth for this year is 17.9%, significantly outperforming the industry average of 1% [5] Group 3: Cash Flow Growth - High cash flow growth is essential for growth-oriented companies, allowing them to fund new projects without relying on external financing [6] - Central Garden's year-over-year cash flow growth stands at 8.7%, compared to an industry average of -3.8% [6] - The company's annualized cash flow growth rate over the past 3-5 years is 11.4%, exceeding the industry average of 9% [7] Group 4: Earnings Estimate Revisions - Positive trends in earnings estimate revisions are correlated with stock price movements [8] - The current-year earnings estimates for Central Garden have increased by 0.4% over the past month, indicating a favorable outlook [8] Group 5: Investment Positioning - Central Garden has achieved a Zacks Rank 1 (Strong Buy) due to overall positive earnings estimate revisions and has a Growth Score of B [10] - This combination positions Central Garden favorably for potential outperformance, making it an attractive option for growth investors [10]

Central Garden & Pet Company (CENT) FY Conference Summary Company Overview - Central Garden & Pet Company is a pet and garden supplies company based in the San Francisco area with annual sales exceeding $3 billion [3][4] - The company offers well-known brands such as Nylabone, KT, and Pennington [3][4] Key Financial Highlights - The company reported record earnings for the year across pet and garden segments [4] - Q4 is showing strong performance, indicating positive momentum [4] - The company has successfully implemented a cost and simplicity program, enhancing operational efficiency [5][6] Market Trends and Insights - The pet durables business is experiencing a decline, particularly in the double-digit range, attributed to a drop in pet ownership post-COVID [7][8] - Cat ownership has remained resilient, with demand for cat products stable, while dog ownership has declined due to affordability issues [10][11] - The garden segment has seen strong performance in grass seed and fertilizer, with a 30% increase in point-of-sale metrics [17] Competitive Landscape - Central Garden & Pet differentiates itself by focusing on categories where it does not compete directly with major players like Scotts and Spectrum, covering 70% of its business [13][14] - The company offers competitive pricing, being 5% to 8% cheaper than competitors while maintaining quality [15] Consumer Behavior and Spending - There is a noted trend of consumers spending more on pets, with pet ownership being prioritized over other expenses [49][50] - The company anticipates potential trading down in consumer spending due to tariff impacts, particularly in the pet segment [50][51] M&A Strategy - M&A remains a critical part of the company's growth strategy, focusing on high-growth, high-margin consumable businesses [33][35] - The company is looking to expand its presence in the cat segment and pet supplements, as well as explore adjacencies in pest control products [36][38] Operational Challenges - Weather patterns significantly impact garden sales, with rainy weekends leading to missed shopping opportunities [23][26] - The company has a low exposure to tariffs compared to other consumer packaged goods (CPG) companies, but is still facing challenges in pricing discussions [46][47] Future Outlook - The company expects to see more M&A opportunities in 2026 as private equity sellers consider sales [39][40] - E-commerce penetration in the pet segment is currently at 27%, with expectations to grow to 40%-50% in the next five years [42] Conclusion - Central Garden & Pet Company is navigating a complex market landscape with a focus on operational efficiency, consumer trends, and strategic growth through M&A, while also addressing challenges posed by economic conditions and consumer behavior shifts [28][29][50]

Financial Performance - Consolidated net sales for fiscal 2024 were $3.2 billion, with the Pet segment contributing approximately $1.8 billion and the Garden segment approximately $1.4 billion[108]. - In the third quarter of fiscal 2025, net sales decreased by $35.4 million, or 3.6%, to $961 million, with Pet net sales down 3.1% and Garden net sales down 4.1%[113]. - For the nine months ended June 28, 2025, net sales decreased by $80 million, or 3.2%, to $2.451 billion, with Pet net sales down 1.7% and Garden net sales down 5.0%[137]. - Net sales for the three months ended June 29, 2024, were $996.3 million, with a gross profit of $317.1 million, resulting in a gross margin of 31.8%[162]. - Net sales for the nine months ended June 28, 2025, were $596,750,000, a decrease from $694,083,000 for the same period in the previous fiscal year, representing a decline of approximately 14.0%[204]. Profitability - Gross profit for the third quarter of fiscal 2025 increased by $15 million, or 4.7%, to $332 million, with gross margin improving by 280 basis points to 34.6%[120]. - Gross profit for the nine months ended June 28, 2025, increased by $26 million, or 3.4%, to $800.8 million, with gross margin improving by 210 basis points to 32.7%[141]. - Non-GAAP gross profit for the nine months ended June 28, 2025 increased by $19.6 million, or 2.5%, to $805.5 million from $785.9 million for the same period in 2024[143]. - Non-GAAP gross margin improved by 180 basis points to 32.9% for the nine months ended June 28, 2025, compared to 31.1% for the same period in 2024[143]. - Operating income for the third quarter of fiscal 2025 rose by $19.2 million, or 16.6%, to $135.1 million, with operating margin increasing from 11.6% to 14.1%[128]. - Operating income increased by $38.6 million, or 17.7%, to $256.4 million for the nine months ended June 28, 2025, with an operating margin of 10.5%[147]. - Net income for the third quarter of fiscal 2025 was $95 million, or $1.52 per diluted share, compared to $79.7 million, or $1.19 per diluted share, in the prior year[135]. - Net income for the nine months ended June 28, 2025 was $172.6 million, or $2.69 per diluted share, compared to $142.1 million, or $2.13 per diluted share, for the same period in 2024[154]. Segment Performance - Pet segment operating income decreased by $6.9 million, or 8.3%, to $76.2 million due to a decline in net sales and increased expenses[129]. - Garden segment operating income increased by $20.5 million to $83 million, driven by improved gross margin and lower expenses[130]. - Pet operating income decreased by $1.0 million, or 0.5%, to $188.1 million for the nine months ended June 28, 2025, due to lower sales and higher expenses[148]. - Garden operating income increased by $33.4 million to $144.1 million for the nine months ended June 28, 2025, driven by increased gross profit and lower expenses[149]. - Non-GAAP operating income for the Pet segment was $195.1 million for the nine months ended June 28, 2025, reflecting strong performance in this category[163]. Expenses and Costs - Selling, general and administrative expenses decreased by $12.6 million, or 2.3%, to $544.4 million for the nine months ended June 28, 2025[144]. - The company incurred approximately $5.3 million in one-time costs related to the wind-down of U.K. operations, with additional costs expected in the following quarters[111]. - Net interest expense decreased by $5.5 million, or 17.4%, to $25.9 million for the nine months ended June 28, 2025, due to increased interest income[151]. - The effective income tax rate increased to 24.4% for the nine months ended June 28, 2025, compared to 23.3% for the same period in 2024[153]. Cash Flow and Liquidity - Net cash provided by operating activities decreased by $42.0 million, from $191.8 million for the nine months ended June 29, 2024, to $149.8 million for the nine months ended June 28, 2025, primarily due to changes in working capital[171]. - Net cash used in investing activities decreased by $60.5 million, from $94.6 million for the nine months ended June 29, 2024, to $34.0 million for the nine months ended June 28, 2025, due to less acquisition activity[172]. - Net cash used in financing activities increased by $140.3 million, from $16.0 million for the nine months ended June 29, 2024, to $156.3 million for the nine months ended June 28, 2025[173]. - The company’s liquidity is supported by cash generated from operations, bank borrowings, and sales of equity and debt securities, ensuring adequate capital resources for growth[167]. Debt and Capital Expenditures - Total debt outstanding was $1,191.3 million as of June 28, 2025, compared to $1,189.7 million at June 29, 2024[177]. - Anticipated capital expenditures for fiscal 2025 are approximately $50 to $60 million, with $31 million already invested through June 28, 2025[175]. - Net availability under the $750 million Credit Facility was approximately $565 million as of June 28, 2025[194]. - Interest rate applicable to Base Rate borrowings was 7.5%, and for one-month SOFR-based borrowings was 5.3% as of June 28, 2025[195]. - The Credit Facility matures on December 16, 2026, and allows for borrowing, repayment, and reborrowing until maturity[193]. Assets and Liabilities - Total assets as of June 28, 2025, were $5,046,632,000, an increase from $4,812,102,000 as of September 28, 2024, showing a growth of approximately 4.9%[204]. - Current liabilities increased to $169,535,000 as of June 28, 2025, compared to $164,607,000 as of September 28, 2024, marking an increase of about 2.8%[204]. - Long-term debt stood at $1,191,070,000 as of June 28, 2025, slightly up from $1,189,655,000, indicating a marginal increase[204]. - Other assets increased to $4,035,980,000 as of June 28, 2025, from $3,799,521,000, representing a growth of about 6.2%[204]. Accounting and Reporting - The company has not reported any material changes in critical accounting policies or market risk exposure since the last annual report[205][207]. - The company has not disclosed any new accounting pronouncements that would materially affect its financial statements[206].

Core Insights - Central Garden & Pet Company (CENT) reported its third-quarter fiscal 2025 results, with net sales declining year over year and missing the Zacks Consensus Estimate, while earnings exceeded expectations and improved from the previous year [1][3][9] - The company's focus on operational efficiency through its Cost and Simplicity program contributed to margin expansion and earnings growth, with management reaffirming its full-year earnings outlook [1][12] Financial Performance - Adjusted earnings per share were $1.56, surpassing the Zacks Consensus Estimate of $1.34 and increasing from $1.32 in the prior year [3][9] - Net sales totaled $960.9 million, a 4% decline from the previous year, missing the consensus estimate of $987 million, primarily due to assortment rationalization and softer demand [3][4] - Gross profit increased by 5% to $332 million, with gross margin expanding by 280 basis points to 34.6%, driven by productivity improvements [4][9] - Adjusted operating income rose to $139 million, up 9% year over year, with adjusted operating margin expanding by 170 basis points to 14.5% [5][9] Segment Performance - The Pet segment reported net sales of $493 million, down 3% year over year, attributed to the exit of lower-margin products and sluggish demand, although market share gains were noted in specific categories [6][7] - The Garden segment's net sales were $468 million, a 4% decline, impacted by adverse weather and the exit of certain product lines, but growth was observed in Wild Bird and Grass Seed categories [8][10] Financial Health - At the end of the quarter, the company had cash and cash equivalents of $713 million, long-term debt of $1,191.2 million, and shareholders' equity of $1,588.2 million, with a gross leverage ratio improving to 2.9 [11] - During the quarter, the company repurchased 1.7 million shares for $55 million, with $46 million remaining under the share repurchase authorization [11] Outlook - The company continues to estimate fiscal 2025 adjusted earnings at $2.60 per share, considering factors such as shifting consumer behavior and macroeconomic uncertainties [12]

Financial Data and Key Metrics Changes - Net sales for Q3 2025 were $961 million, a decline of 4% compared to the previous year [17] - Gross profit increased by 5% to $332 million, with gross margin expanding by 280 basis points to 34.6% [17] - Non-GAAP net income totaled $98 million, an increase of 11%, while GAAP earnings per share rose by 28% to $1.52 [20] - Non-GAAP EPS increased by 18% to $1.56, marking record results for the third quarter [20] Business Line Data and Key Metrics Changes Pet Segment - Net sales for the Pet segment were $493 million, down 3%, primarily due to exiting lower-margin durable products [21] - Consumables now represent 82% of total pet sales, up from 79% a year ago, indicating a shift towards higher-margin products [22] - Non-GAAP operating income for the Pet segment was $78 million, down 6%, with non-GAAP operating margin contracting by 60 basis points to 15.8% [23] Garden Segment - Net sales for the Garden segment were $468 million, representing a 4% decline, driven by the exit of two product lines and adverse weather conditions [24] - Non-GAAP operating income for Garden rose to $85 million, an increase of $12 million, with non-GAAP operating margin expanding by 310 basis points to 18.2% [25] Market Data and Key Metrics Changes - E-commerce accounted for 27% of total Pet sales, consistent with the prior quarter but slightly below the same period last year [23] - The Garden and e-commerce channel achieved double-digit growth, particularly in wild bird and grass seed categories [25] Company Strategy and Development Direction - The company is focused on operational optimization, including consolidating distribution centers and enhancing e-commerce capabilities [9][10] - The "central to home" strategy aims to blend startup agility with large enterprise scale, fostering innovation and market share growth [13][14] - M&A is viewed as a strategic lever to complement internal innovation, with plans to accelerate efforts in 2026 as market conditions improve [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the full-year outlook despite macroeconomic uncertainties and anticipated increased consumer value consciousness [12] - The company expects tariff-related inflationary pressures to intensify, particularly in the Pet segment, but reaffirms non-GAAP EPS guidance of approximately $2.6 for the fiscal year [13][28] Other Important Information - The company streamlined operations by consolidating 20 outdated locations and creating five efficient direct-to-consumer hubs [10] - Cash provided by operations was $265 million for the quarter, with a reduction in inventory of $67 million [26] - The company repurchased approximately 1.7 million shares, totaling $55 million, with $46 million remaining under the share repurchase program [27] Q&A Session Summary Question: How should investors think about the opportunity to keep improving margins? - Management highlighted ongoing efforts in cost and simplicity, with a focus on portfolio optimization and innovation to enhance margins [30][34] Question: What are the implications of tariffs on margins? - The company expects most tariff impacts to surface in Q4, with pricing actions being considered to mitigate cost increases [38][40] Question: Can you elaborate on Pet trends as the year ends? - Management noted a challenged consumer environment but indicated stabilization in pet ownership and live animal business, with consumables remaining flat and durables declining [44][46] Question: What categories drove EPS upside in Garden? - Strong performance was noted in wild bird food, fertilizer, and grass seed categories, despite challenging weather conditions [49][50] Question: How much longer will SKU rationalization impact top line growth? - Management indicated uncertainty regarding the duration of SKU rationalization impacts, with more clarity expected in future guidance [83][84] Question: What is the long-term growth rate expectation for pet consumables? - Management believes the pet consumables category can grow low to mid-single digits in the long term, supported by stabilizing pet ownership [110]

Financial Data and Key Metrics Changes - Net sales for Q3 2025 were $961 million, a decline of 4% year-over-year [16] - Gross profit increased by 5% to $332 million, with gross margin expanding by 280 basis points to 34.6% [16] - Non-GAAP operating income rose by 9% to $139 million, with non-GAAP operating margin expanding by 170 basis points to 14.5% [18] - GAAP earnings per share increased by 28% to $1.52, while non-GAAP EPS rose by 18% to $1.56 [20] - Adjusted EBITDA was $167 million, an increase of $11 million year-over-year [21] Business Line Data and Key Metrics Changes Pet Segment - Net sales for the Pet segment totaled $493 million, down 3% [21] - Consumables now represent 82% of total pet sales, up from 79% a year ago [22] - Non-GAAP operating income for the Pet segment was $78 million, down 6% compared to the previous year [23] - E-commerce accounted for 27% of total Pet sales, consistent with the prior quarter [23] Garden Segment - Net sales for the Garden segment were $468 million, representing a 4% decline [24] - Non-GAAP operating income for Garden rose to $85 million, up $12 million year-over-year [25] - Adjusted EBITDA for the Garden segment was $96 million, an improvement of $11 million year-over-year [26] Market Data and Key Metrics Changes - The company faced top-line pressure from the loss of two product lines in the garden distribution business and soft demand in pet durables [6][11] - Despite challenges, the company maintained market share and gained in key consumer categories such as dog chews and flea and tick products [22] - E-commerce channels for both segments showed double-digit growth, particularly in the Garden segment [25] Company Strategy and Development Direction - The company is focused on operational optimization, including consolidating distribution centers and streamlining operations [7][10] - The "central to home" strategy aims to blend agility with scale, empowering teams to innovate and grow market share [12] - The company plans to accelerate M&A efforts in 2026, viewing it as a strategic lever for long-term shareholder value [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the full-year outlook despite macroeconomic uncertainties and pressures on consumer confidence [11] - The company anticipates increased consumer value consciousness and heightened promotional activity across retail channels [11] - Management noted that tariff-related inflationary pressures are expected to intensify, particularly in the Pet segment [12] Other Important Information - The company completed the sale of its U.K. operations and transitioned to a direct export model for certain products [8] - Cash provided by operations was $265 million for the quarter, with a focus on working capital management [26] - The company repurchased approximately 1.7 million shares for $55 million during the quarter [27] Q&A Session Summary Question: How should investors think about the opportunity to keep improving margins? - Management highlighted ongoing efforts in cost and simplicity, with a focus on portfolio optimization and innovation to enhance margins [30][32] Question: What are the implications of tariffs on margins? - Management expects most tariff impacts to surface in Q4, with pricing actions being considered to mitigate cost increases [39][41] Question: Can you elaborate on Pet trends as the year ends? - Management noted a challenged consumer environment but indicated stabilization in pet ownership and live animal business [46][48] Question: What was the impact of exited product lines on sales? - Management acknowledged significant impacts from assortment rationalization, particularly in the Pet segment [57][60] Question: What will it take for the Garden segment to return to consistent growth? - Management indicated that favorable weather conditions are crucial for growth, alongside strong consumer engagement [88][90]

Q3 FY25 Performance Highlights - The company achieved record Q3 and Year-to-Date GAAP and Non-GAAP EPS [12] - Significant margin expansion was observed during the quarter [12] - There was a major improvement in workplace safety performance [12] Financial Results - Q3 net sales were $960.913 million [49] - GAAP gross margin was 34.6% [49] - Non-GAAP operating income was $139.041 million [49] - Adjusted EBITDA reached $166.568 million [50] Segment Performance - Pet segment net sales were $493 million with a non-GAAP operating margin of 15.8% [28] - Garden segment net sales were $468 million with a non-GAAP operating margin of 18.2%, up 310 bps [29, 30] Outlook - The company reaffirmed fiscal year 2025 non-GAAP EPS guidance of approximately $2.60 [15]

Group 1 - Central Garden & Pet Company (CENT) has recently experienced a "golden cross" event, indicating a potential bullish breakout as its 50-day simple moving average has crossed above its 200-day simple moving average [1][2] - The stock has shown a positive trend, with shares increasing by 6.6% over the past four weeks, and it currently holds a 1 (Strong Buy) rating on the Zacks Rank, suggesting further breakout potential [4] - The earnings outlook for CENT is positive, with no earnings estimates decreasing in the past two months and two revisions higher, leading to an increase in the Zacks Consensus Estimate [4][6] Group 2 - A golden cross event typically consists of three stages: the stock price bottoms out, the shorter moving average crosses above the longer moving average, and the stock maintains upward momentum [3] - The golden cross is contrasted with a death cross, which indicates potential bearish momentum [3]

Core Viewpoint - Central Garden (CENT) is expected to report a year-over-year increase in earnings despite lower revenues, with the actual results being crucial for near-term stock price movements [1][2]. Earnings Expectations - The upcoming earnings report is anticipated to show quarterly earnings of $1.34 per share, reflecting a +1.5% change year-over-year, while revenues are projected at $987.14 million, down 0.9% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating a stable outlook from covering analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates a positive Earnings ESP of +6.98% for Central Garden, suggesting analysts have recently become more optimistic about the company's earnings prospects [12]. Historical Performance - Central Garden has a strong track record, having beaten consensus EPS estimates in the last four quarters, including a +10.64% surprise in the most recent quarter [13][14]. Investment Considerations - While a positive earnings surprise is likely, other factors may influence stock performance, making it essential for investors to consider the broader context beyond just earnings results [15][17].

Core Insights - Chewy, Inc. (CHWY) and Central Garden & Pet Company (CENT) are key players in the pet care industry, each with unique operational models and growth strategies [1] - Chewy focuses on e-commerce and customer engagement, while Central Garden & Pet emphasizes a diversified portfolio and operational efficiency [1] Chewy, Inc. (CHWY) - Chewy reported net sales of $3.12 billion in fiscal Q1 2025, an 8.3% year-over-year increase, exceeding guidance [2] - The Autoship program generated $2.56 billion in sales, accounting for 82% of total net sales, with a 14.8% year-over-year growth [3] - Active customer base grew by 3.8% year-over-year to 20.8 million, with net sales per active customer rising 3.7% to $583 [4] - Chewy Vet Care operates 11 clinics and plans to open 8-10 more in fiscal 2025, while the Chewy+ membership program shows early success [5] - Adjusted EBITDA margin for Q1 was 6.2%, but management expects a decline due to seasonality and increased marketing investments [6] - Marketing expenses reached $193.8 million, or 6.2% of sales, projected to rise to 6.7-6.8% for the year [7] Central Garden & Pet Company (CENT) - CENT's adjusted gross margin improved by 200 basis points to 33.3% in Q2, reflecting strong cost management [9][13] - E-commerce accounted for 27% of Pet segment sales, driven by new products and digital strategies [14] - The company opened a 300,000-square-foot distribution center in New Jersey, enhancing fulfillment capabilities [12] - Financially, CENT ended Q2 with $517 million in cash and no borrowings, maintaining a net leverage ratio of 1.7X [15] - The consensus estimate for CENT's fiscal 2025 sales suggests a year-over-year decline of 1.7%, while EPS is expected to grow by 17.8% [20] Comparative Analysis - Chewy's shares gained 1% over the past three months, while CENT's stock rose 19.6%, driven by strong margin expansion and cost execution [21] - Chewy's forward price-to-sales (P/S) multiple is 1.20, while CENT's is 0.85, indicating a more attractive valuation for CENT [22][23] - Central Garden & Pet is viewed as a better investment due to disciplined cost management and consistent margin expansion, while Chewy faces near-term challenges [26][27]