Financial Data and Key Metrics Changes - Net sales for fiscal 2025 were $3.1 billion, a decrease of 2% due to lower demand in pet durables and the transition of product lines [14][17] - Non-GAAP gross profit increased to $1 billion, up 4.5%, with non-GAAP gross margin expanding 210 basis points to 32.1% [15][17] - Non-GAAP net income totaled $174 million, up 22%, with record GAAP and non-GAAP earnings per share of $2.55 and $2.73, respectively [17] - Adjusted EBITDA for the year was $371 million compared to $334 million [17] Business Line Data and Key Metrics Changes - In the pet segment, net sales were $428 million, a decrease of 2%, impacted by the closure of U.K. operations and lower durable sales [20] - The garden segment saw net sales of $250 million, a 7% increase, driven by favorable weather and improved sell-through [21] - Consumables now represent approximately 84% of total pet segment sales, highlighting the strength of the core business [20] Market Data and Key Metrics Changes - E-commerce represented 27% of total pet segment sales, consistent with previous quarters, indicating steady consumer engagement [21] - Garden e-commerce sales grew at a double-digit rate, surpassing 10% of total segment sales for the first time [22] Company Strategy and Development Direction - The company is focused on a central-to-home strategy, streamlining operations, and optimizing its portfolio for sustainable growth [4][9] - Strategic investments are being made in innovation, e-commerce, and digital technology to enhance competitive advantage [10][11] - The company aims to balance cost management with targeted investments to fuel organic growth [10] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for fiscal 2026, anticipating challenges due to tariffs and consumer confidence [38][46] - The company expects non-GAAP earnings per share to be $2.70 or better for fiscal 2026, supported by margin expansion and operational performance [9][24] - Management highlighted the importance of weather conditions for the garden segment's performance in the upcoming season [29][46] Other Important Information - The company has a strong balance sheet with cash and cash equivalents totaling $882 million, providing flexibility for growth investments [24] - The ongoing focus on working capital efficiency resulted in a $36 million reduction in inventory [23] Q&A Session Summary Question: Can you discuss the operating margin outlook for the upcoming fiscal year? - Management indicated intentions to expand margins into 2026, though the pace may be slower due to previous efficiencies being realized [27][28] Question: What is the outlook for the garden category in 2026? - Management expressed cautious optimism, citing an expected increase in distribution points and strong execution, but noted that weather will be a significant factor [29] Question: Can you provide details on corporate expenses in Q4? - Corporate expenses increased due to quarterly timing variations and investments to support commercial growth [30] Question: What was the impact of tariffs in Q4? - Gross tariffs were approximately $7 million to $8 million in the fourth quarter [31] Question: How is the company addressing pricing with retail customers? - Management stated that negotiations with customers are ongoing, with expectations to finalize discussions soon [33] Question: What is the company's view on pet ownership trends? - Management noted that pet ownership trends appear to be stabilizing, with slight gains observed in Q4 [41] Question: What is the company's approach to capital allocation? - The company is focused on M&A opportunities while maintaining a strong cash position, with share repurchases being opportunistic [43][50]