Financial Data and Key Metrics Changes - Net sales for fiscal 2025 were $3.1 billion, a decrease of 2% due to proactive decisions to reduce exposure to lower-margin businesses and the transition of two third-party product lines to a direct-to-retail model [14][15] - Non-GAAP gross profit increased to $1 billion, up 4.5%, with non-GAAP gross margin expanding 210 basis points to 32.1% [15] - 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] Business Line Data and Key Metrics Changes - In the pet segment, net sales were $428 million, a decrease of 2% due to the closure of U.K. operations and lower durable sales, partially offset by strong growth in animal health businesses [21] - The garden segment saw net sales of $250 million, a 7% increase, benefiting from an extended selling season and improved sell-through [22] - Consumables now represent approximately 84% of total pet segment sales, highlighting the strength of the core business [21] Market Data and Key Metrics Changes - E-commerce represented 27% of total pet segment sales, consistent with previous quarters, indicating steady consumer engagement across digital platforms [22] - Garden e-commerce sales grew at a double-digit rate, surpassing 10% of total segment sales for the first time [23] Company Strategy and Development Direction - The company is focused on a "central-to-home" strategy, streamlining operations, consolidating facilities, and optimizing the portfolio to enhance cost structure and drive sustainable growth [5][9] - Strategic investments are being made in innovation, e-commerce, and digital technology, with a key priority on making data AI-ready [10][11] - The company is actively pursuing margin-accretive consumable businesses for growth through M&A, although market engagement has been limited [12] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for fiscal 2026, anticipating challenges due to tariffs and consumer confidence but remains committed to delivering profitable growth [9][61] - The company expects non-GAAP earnings per share for fiscal 2026 to be $2.70 or better, supported by margin expansion and operational performance [9][26] - Management noted that the bifurcation of income is affecting consumer behavior, impacting both pet and garden categories [61] Other Important Information - Cash flow from operations was $333 million, with a strong liquidity position reflected in cash and cash equivalents totaling $882 million [24][25] - The company plans to invest approximately $50 million-$60 million in CapEx for maintenance and productivity initiatives [27] 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 previously captured efficiencies [32][33] Question: What is the outlook for the garden segment in the upcoming season? - Management expressed cautious optimism, citing increased distribution points and strong execution, but noted that weather remains a significant factor [35][36] Question: Can you quantify the impact of tariffs on the fourth quarter? - Tariffs were estimated to be around $7 million-$8 million in the fourth quarter [42] Question: How is the company navigating pricing with retail customers? - Management is in negotiations with customers regarding pricing adjustments to offset costs, with expectations to finalize discussions soon [50][51] Question: What is the company's view on pet ownership trends? - Management noted that pet ownership trends appear to be stabilizing, with slight growth observed in Q4 [68][70] Question: What is the company's capital allocation strategy given the strong cash position? - Management is focused on M&A opportunities while remaining opportunistic with share repurchases, indicating a preference for growth through acquisitions [71][88]

Financial Data and Key Metrics Changes - Net sales for fiscal 2025 were $3.1 billion, a decrease of 2% due to proactive decisions to reduce exposure to lower-margin businesses and the transition of two third-party product lines to a direct-to-retail model [15][16] - Non-GAAP gross profit increased to $1 billion, up 4.5%, with non-GAAP gross margin expanding 210 basis points to 32.1% [16] - 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 [18] Business Line Data and Key Metrics Changes - In the pet segment, net sales were $428 million, a decrease of 2%, primarily due to the closure of U.K. operations and lower durable sales [22] - The garden segment saw net sales of $250 million, a 7% increase, driven by favorable weather and improved sell-through [24] - Consumables now represent approximately 84% of total pet segment sales, highlighting the strength of the core business [22] Market Data and Key Metrics Changes - E-commerce represented 27% of total pet segment sales, consistent with previous quarters, indicating steady consumer engagement [23] - Garden e-commerce sales grew at a double-digit rate, surpassing 10% of total segment sales for the first time [24] Company Strategy and Development Direction - The company is focused on a central-to-home strategy, streamlining operations, and optimizing its portfolio to enhance cost structure and position for sustainable growth [5][10] - The company plans to invest in innovation, e-commerce, and digital technology, with a key priority of making data AI-ready [11][12] - M&A remains a strategic lever for growth, with a focus on margin-accretive consumable businesses [13] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for fiscal 2026, anticipating challenges due to tariffs and consumer confidence [62] - The company expects non-GAAP earnings per share for fiscal 2026 to be $2.70 or better, supported by margin expansion and operational performance [10][27] - Management noted that the bifurcation of income is affecting consumer behavior, but they are not seeing significant impacts in specific channels [100][101] Other Important Information - Cash flow from operations was $333 million, with a strong liquidity position reflected in cash and cash equivalents totaling $882 million [26] - The company plans to invest approximately $50 million-$60 million in CapEx for maintenance and productivity initiatives [28] 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 more modest due to previous gains [33][34] Question: What is the outlook for the garden category in 2026? - Management expressed cautious optimism, citing an expected increase in distribution points and the importance of weather conditions [36][37] Question: Can you quantify the impact of tariffs in the fourth quarter? - Tariffs were estimated to be around $7 million-$8 million in the fourth quarter [43] Question: How is the company navigating pricing with retail customers? - Management is in negotiations with customers regarding pricing adjustments to offset costs, with expectations to finalize discussions soon [51][52] Question: What is the company's view on pet ownership trends? - Management noted that pet ownership trends are stabilizing, with slight growth observed in Q4 [70][71] Question: What is the company's capital allocation strategy moving forward? - Management is focused on M&A opportunities while remaining opportunistic with share repurchases, emphasizing the importance of finding the right deals [72][89]