Central Garden & Pet Company (NasdaqGS:CENT) Q1 2026 Earnings call February 04, 2026 04:30 PM ET Company ParticipantsBrad Smith - CFOBrad Thomas - Managing DirectorFriederike Edelmann - Head of Investor RelationsJ.D. Walker - President of Garden Consumer ProductsJohn Hanson - President of Pet Consumer ProductsNiko Lahanas - CEOConference Call ParticipantsBrian McNamara - AnalystJim Chartier - AnalystOperatorLadies and gentlemen, thank you for standing by. Welcome to Central Garden & Pet's Fiscal 2026 First ...

Core Viewpoint - The Mosaic Company reported a significant decline in North American fertilizer demand during the fourth quarter of 2025, attributed to weak fall applications and adverse weather conditions [1] Industry Summary - Fertilizer demand in North America experienced a decline that exceeded typical seasonal softness, indicating a challenging market environment [1] - The decline in demand was influenced by ongoing pressure on grower economics, which affected application rates [1] - An early onset of winter weather further compressed the application window, exacerbating the decline in fertilizer usage [1]

Core Insights - Central Garden & Pet Company (CENT) is trading at a forward 12-month price-to-earnings (P/E) multiple of 11.85X, which is below the industry average of 16.71X, raising questions about whether this discount reflects challenges or presents a buying opportunity [1][8] Financial Performance - CENT shares have increased by 10.8% over the past three months, slightly underperforming the industry's rise of 11.3% but outperforming the sector's decline of 2.5% and the S&P 500 Index's gain of 6.4% during the same period [2] - The Zacks Consensus Estimate indicates year-over-year sales growth of 0.8% for the current year and 1.2% for the next year, while earnings are expected to grow by 1.1% and 4.7% respectively [12][13] Strategic Initiatives - The company is refining its portfolio to focus on high-growth, high-margin categories while exiting underperforming segments, including the sale of its garden distribution business and a strategic exit from the pottery business [3] - Management is intentionally exiting lower-margin, more volatile businesses, which is expected to lead to a sales decline in fiscal 2025 due to reduced exposure to lower-margin products and the transition of certain product lines to a direct-to-retail model [4] Operational Efficiency - A key component of CENT's strategy is the "Cost and Simplicity" program, which has improved the company's margin profile, resulting in an adjusted gross margin expansion of 210 basis points to 32.1% in fiscal 2025 [5][8] - The company is accelerating its shift towards e-commerce, with e-commerce now accounting for 27% of Pet segment sales and over 10% of Garden segment sales, indicating a strong adaptation to changing consumer behaviors [9] Market Resilience - Despite market volatility and weather fluctuations, CENT's core segments have shown resilience, with the Garden segment achieving its largest point-of-sale year on record and the Pet segment maintaining overall market share [10]

Group 1 - The core viewpoint of the articles is that China's fertilizer utilization rate for major grain crops (wheat, corn, and rice) is projected to reach 43.3% by 2025, an increase of 3.1 percentage points from 2020 [1][2] - The continuous improvement in fertilizer utilization rate is attributed to systematic policy guidance, technological innovation, and optimized promotion services [1] - The Ministry of Agriculture and Rural Affairs has been actively promoting the reduction and efficiency of fertilizer use since the start of the 14th Five-Year Plan, implementing green farming practices and enhancing soil testing and fertilization techniques [1] Group 2 - By 2025, the coverage rate of soil testing and formulated fertilization technology for the three major grain crops is expected to exceed 95% [1] - The promotion of new scientific fertilization products, technologies, and equipment is expected to significantly increase the efficiency of fertilizer use, with specific initiatives such as deep fertilization for rice and integrated water and fertilizer management for corn and wheat [1] - The cumulative promotion of soybean inoculation with rhizobium bacteria has reached nearly 8 million acres, resulting in an average reduction of nitrogen fertilizer application by 0.5 kg per acre [2] Group 3 - The area of organic fertilizer application is projected to exceed 650 million acres by 2025, with pilot projects in green farming reducing fertilizer use by an average of 10% [2] - There are currently over 17,000 socialized scientific fertilization service organizations in China, providing services for an area of 250 million acres annually [2] - The establishment of intelligent fertilization service points and the provision of specialized services have significantly contributed to the increase in fertilizer utilization rates [2]

Core Insights - The Mosaic Company (NYSE:MOS) has shown strong performance recently, with a 4.05% increase in stock price to $26.21, driven by bargain-hunting after a previous decline due to a price target downgrade [1][3] - RBC has lowered its price target for Mosaic from $30 to $27, citing expectations of weaker fertilizer supply in the upcoming year [2] - Zacks Research has upgraded Mosaic from "strong sell" to "hold," indicating a more favorable outlook [3] Financial Performance - Mosaic reported a significant increase in net income for Q3, rising 237% to $411 million from $122 million year-on-year, largely due to a $308 million unrealized gain on Ma'aden shares valued at approximately $1.9 billion [4] - Net sales for Mosaic also increased by 25% to $3.5 billion from $2.8 billion year-on-year, attributed to higher sales across its fertilizer, phosphate, and potash segments [5] Dividend Announcement - Common shareholders as of the December 4 record date will receive a cash dividend of $0.22 on December 18 [4]

Summary of Central Garden & Pet Company Conference Call Company Overview - **Company**: Central Garden & Pet Company (NasdaqGS:CENT) - **Date of Conference**: December 12, 2025 - **Key Speakers**: Brad Smith (CFO), Friedrich Edelmann (VP of Investor Relations and Corporate Sustainability) Key Points Leadership and Organizational Changes - The company has shifted from a centrally driven, process-heavy model to a more agile, business unit-led culture under new CEO Niko Lahanas, enhancing collaboration and trust across the organization [3][4][5] Market Share and Product Innovation - In the past year, Central gained market share in the garden segment and held share in the pet segment, despite challenges in exiting unprofitable categories and e-commerce pricing issues [6][7] - The company is optimistic about growing market share in both segments in 2026 due to improved product placements and distribution gains [7] - Innovation efforts are ongoing, with a focus on digital marketing capabilities to drive sales and brand awareness [8][9] Pet Segment Insights - The pet segment is primarily focused on dogs (90%) and cats (10%), with cat ownership continuing to grow post-COVID due to lower costs and easier management [10][12] - Demand for small dogs, fish, and small animals is stabilizing, with expectations for a turnaround in growth by 2026 [13] Garden Segment Outlook - The garden segment finished the year with the highest point of sale (POS) despite challenging weather conditions, indicating strong performance in wild bird, grass seed, fertilizer, and packet seed categories [14][15] - The company is optimistic about growth in the garden segment, especially if weather conditions improve [16][19] E-commerce Strategy - E-commerce accounts for over 25% of the pet business and is rapidly growing in the garden segment, with a focus on enhancing digital marketing and direct-to-consumer capabilities [20][21] - The company is leveraging AI and other technologies to improve marketing efficiency and customer engagement [22] Acquisition Strategy - Central is looking to deploy nearly $900 million in cash for acquisitions, focusing on high-growth, high-margin consumables, particularly in the pet segment [24][25][26] - Cat products represent a significant growth opportunity due to underrepresentation in the company's portfolio [26] Cost and Simplicity Initiatives - The "Cost and Simplicity" initiative aims to eliminate unnecessary costs and improve cash flow, contributing significantly to margin expansion [27][28] - The company has closed approximately 20 facilities and exited unprofitable businesses, with ongoing efforts to find further cost-saving opportunities [28] Financial Performance and Margin Outlook - The company anticipates sustaining or modestly expanding margins despite cost headwinds from tariffs and other factors, supported by cost-saving initiatives [32][33] - Recent financial results have been strong, with record EBIT and EBITDA, indicating a successful transformation towards a simpler, higher-margin business model [51][52] Tariff Impact - The company faces a $20 million headwind from tariffs, but has managed to pass most of these costs onto customers, maintaining competitive pricing [36][44] Investor Relations and Future Outlook - Central's structural transformation, strategic investments in e-commerce, and strong customer relationships position it well for future growth [51][52][53] - The company is optimistic about consolidating market share and believes it is well-positioned compared to competitors [53] Conclusion Central Garden & Pet Company is navigating a transformative phase with a focus on agility, innovation, and strategic growth in both the pet and garden segments. The leadership changes and ongoing initiatives are expected to drive future performance and market share gains.

Market Performance & Key Indices - S&P 500 closed at a record high, up approximately 02% [7] - Dow Jones Industrial Average closed at a record high, up more than 600 points or 13% [8] - Russell 2000 outperformed, up 12% to a fresh record high [8] - Nasdaq Composite and Nasdaq 100 declined by about 02% to 03% [7] Individual Stocks & Company News - Oracle's stock experienced its worst single day since January, down 109%, following increased spending on data centers and equipment [16][17] - Rivian shares fell by 6% after unveiling its own AI chip to replace Nvidia tech [18][19] - Eli Lilly's stock increased, with its next-generation obesity shot showing promising results in weight loss and knee pain reduction [14] - Disney agreed to invest $1 billion in OpenAI AI and license iconic characters for use on the startup's AI video platform [15] Sector Performance - Materials sector was a significant outperformer, up by 22% [11] - Financials sector also performed well, up 18% [11] - Communication Services sector was the worst performer, down 1% [11] Lululemon Management Change & Financials - Lululemon announced that Calvin McDonald will step down as CEO effective January 31st, 2026, with Marty Morphett taking on an expanded role as executive chair [21][22] - Lululemon's fourth-quarter net revenue outlook is $35 billion to $359 billion [23] - Lululemon's third-quarter EPS was $259, exceeding the street estimate of $222 [23] - Lululemon's international comp sales for the third quarter, ex currency, were up 18%, exceeding the estimated street estimate of 107% [24]

Summary of The Andersons 2025 Investor Day Company Overview - **Company**: The Andersons (NasdaqGS:ANDE) - **Event**: 2025 Investor Day held on December 09, 2025 - **Key Focus**: Long-term growth strategy, business insights, and financial performance Core Messages and Strategic Insights 1. **Strengthened Company Position**: The Andersons is a materially stronger company with a seasoned team and deep expertise in agriculture and renewable fuels, poised for profitable growth [6][7][10] 2. **Diversified Portfolio**: The company has a balanced and diversified portfolio that has shown resilience through market cycles, particularly in North American agriculture and renewable supply chains [7][10] 3. **Renewables Growth Engine**: The renewables segment, particularly ethanol assets, has been a high-return business with ongoing investment opportunities, including a recent $425 million acquisition to enhance ethanol production [10][11] 4. **Disciplined Capital Allocation**: The Andersons employs a disciplined capital allocation strategy, leveraging consistent cash flows to drive long-term shareholder value [7][10] Financial Performance - **Q3 2025 Adjusted EPS**: $2.56 per share, with a target of $4.30 per share by the end of 2026 [11] - **Debt Management**: Long-term debt to EBITDA reduced by over 2.5 turns since 2020 while deploying $1 billion in capital [10] - **Earnings Power**: Demonstrated strong earnings power during the peak of the agricultural cycle in 2022 and 2023 [10] Business Segments Agribusiness 1. **Integrated Supply Chain**: The agribusiness segment connects producers to end users, trading over 800 million bushels of corn annually and supplying 165 million bushels to ethanol plants [13][14] 2. **Fertilizer and Grain Handling**: The company operates a network of grain elevators and fertilizer distribution, contributing 25%-30% of normalized EBITDA from fertilizers and 30%-35% from grain assets [17][19] 3. **Merchandising Expertise**: The asset-light merchandising model generates 35%-40% of normalized EBITDA, leveraging market analysis and logistics to optimize grain flows [20][22] Renewables 1. **Ethanol Production**: The Andersons operates four ethanol plants with a nameplate capacity of 393 million gallons, currently exceeding 500 million gallons in production [24][62] 2. **Co-Products**: The company maximizes revenue from co-products like dry distillers grains and corn oil, which contribute significantly to overall revenue [24][62] 3. **Market Position**: The renewables segment is positioned to benefit from low carbon fuel standards and the 45Z clean fuel production credits, enhancing profitability [27][60] Growth Strategy 1. **Macro Trends**: The Andersons is well-positioned to capitalize on favorable macro trends in energy and agriculture, focusing on organic growth and strategic acquisitions [30][31] 2. **Operational Excellence**: Continuous improvement and optimization of operations are key to driving efficiencies and cost savings [31][56] 3. **Customer-Centric Approach**: The company emphasizes a customer-first culture, enhancing relationships and delivering tailored solutions [54][55] Future Outlook - **Long-Term EPS Target**: A publicly stated target of $7 per share by the end of 2028 [33] - **Market Opportunities**: The Andersons aims to leverage its integrated capabilities and market knowledge to capture growth in both agribusiness and renewables [60][63] Additional Insights - **Sustainability Initiatives**: The company is actively developing sustainability programs and regenerative farming practices to meet evolving consumer and stakeholder requirements [47] - **Export Infrastructure**: Investments in export facilities, such as the Port of Houston, are aimed at enhancing market access and efficiency [53][46] This summary encapsulates the key points discussed during The Andersons 2025 Investor Day, highlighting the company's strategic direction, financial performance, and growth opportunities in the agribusiness and renewables sectors.

Group 1 - The discussion highlights the profitability issues faced by farmers, particularly regarding machinery and fertilizer costs, which are influenced by imports from countries like Canada [5][6][8] - There is a plan to bolster domestic fertilizer production through severe tariffs on foreign imports, aiming to make fertilizer more affordable for American farmers [6][7] - The administration emphasizes the need to address skyrocketing input costs that are affecting farmers, while foreign-owned companies in the meatpacking sector continue to profit significantly [8][9] Group 2 - The administration expresses a preference for homegrown produce over cheaper foreign alternatives, although some products cannot be grown domestically due to climate limitations [11] - There is a focus on making American farmers stronger, with discussions around potential tariff revenue to provide additional relief [12][13] - The administration claims that the current economic situation is favorable, with significant investments flowing into the country, amounting to $18 trillion, which is unprecedented [21][22] Group 3 - Concerns are raised about the impact of Obamacare on health care premiums, with expectations that 22 million Americans will see their insurance costs rise due to expiring subsidies [23][24] - The administration's plan involves redirecting funds from insurance companies to individuals, allowing them to purchase their own health care, which is positioned as a more favorable approach [26][27][36] - The administration criticizes the current health care system as being overly beneficial to insurance companies, which have seen significant stock price increases [25][35] Group 4 - The discussion touches on the challenges faced in appointing U.S. attorneys due to the blue slip process, which is seen as a barrier to appointing qualified candidates [39][40] - The administration expresses frustration over the inability to appoint Republican U.S. attorneys in states with Democrat senators, highlighting a perceived imbalance in the political appointment process [41][42] - There is a call for reforming the blue slip process to allow for a more equitable appointment of U.S. attorneys, emphasizing the need for highly qualified candidates [43]

Core Viewpoint - The European Union's Carbon Border Adjustment Mechanism (CBAM) is facing challenges as the default carbon emission values for imports from countries like China and Brazil are unexpectedly lower than those of some European producers, undermining the intended punitive measures [1][3][10] Group 1: CBAM Implementation and Impact - The CBAM is set to be enforced starting January 1, 2026, and aims to regulate carbon emissions from imported goods by establishing default values [1] - European industrial giants are reacting with alarm as the calculated default carbon emissions for Chinese steel are lower than those of some existing European production lines, contradicting the EU's protective narrative [3][6] - The EU's decision-making process is caught in a dilemma, balancing the need for stringent carbon tariffs against the economic pressures faced by local industries reliant on cheaper imports [6][8] Group 2: Implications for European Industry - The situation reveals a significant efficiency advantage for Chinese steel production, with billions of tons of capacity achieving energy efficiency benchmarks by the end of 2024, outperforming many outdated European industrial assets [8] - European industrial stakeholders are lobbying for administrative measures to artificially inflate the assumed pollution values of Chinese products, exposing the underlying political motivations behind the CBAM [8][10] - If the CBAM is manipulated for political purposes, it risks losing its legitimacy under WTO frameworks, threatening the EU's role as a rule-maker in global trade [10]