Financial Data and Key Metrics Changes - Net sales increased by 33% to $935 million, driven by 23% organic growth and $76 million from recent acquisitions [14][19] - Gross margin decreased by 40 basis points to 29.1% due to purchase accounting adjustments and cost inflation [14][19] - Operating margin increased by 180 basis points to 11.2% due to operating efficiencies [14][20] - EPS on a GAAP basis increased by 69% to $1.32, reflecting strong organic performance [14][23] Business Line Data and Key Metrics Changes - Pet segment sales increased by 21% to $492 million, with strong growth in small animal supplies and dog and cat products [22] - Garden segment sales increased by 49% to $443 million, with notable growth in distribution, fertilizers, and grass seed [21] - E-commerce sales in the pet business grew over 50%, representing approximately 21% of pet branded sales [15] - E-commerce sales in the garden segment grew triple-digits, now representing 6% of total garden sales [16] Market Data and Key Metrics Changes - The surge in pet adoption in 2020 led to an 8% increase in dog ownership and a 5% increase in cat households, translating to over 4 million new pet-owning households [15] - Approximately one-third of new pet-owning households are younger and more digitally savvy, indicating future growth opportunities [15] - In the garden segment, 8 million households entered the lawn and garden consumables category since the pandemic began, with a significant portion being millennials and Gen Z consumers [16] Company Strategy and Development Direction - The company is focused on its "Central to Home" strategy, which includes five strategic pillars: Consumer, Customer, Central, Cost, and Culture [8][12] - Recent acquisitions in the garden space are expected to be accretive to earnings in fiscal year 2021, with ongoing integration efforts [11][27] - The company is investing heavily in e-commerce and digital marketing capabilities to strengthen its market position [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing recovery from COVID-19 and the importance of vaccination efforts for employee safety [6][7] - The company anticipates continued strong demand in both pet and garden segments, despite facing inflationary pressures and supply chain challenges [17][26] - Guidance for full-year 2021 GAAP EPS has been raised to $2.25 or higher, reflecting strong business momentum [27] Other Important Information - The company is doubling its CAPEX expenditures in fiscal 2021 to expand manufacturing capacity and improve service levels [17][24] - Total debt increased to $979 million, with a gross leverage ratio of 2.5 times, well within the target range [24] - The company is actively scanning the market for additional acquisition opportunities in both the pet and garden sectors [11][27] Q&A Session Summary Question: Can you provide more color on sales and EBITDA contribution from recent acquisitions? - Sales for the quarter from acquisitions were $76 million, but EBITDA contribution was minimal due to purchase accounting adjustments [28][29] Question: How are trends going as retailers prepare for the season? - Retailers remain engaged and optimistic, having taken aggressive positions to prepare stores for the season, but weather conditions may impact consumer engagement [39] Question: What are the assumptions for cost of goods inflation this year? - The company expects pricing to be insufficient to cover all inflationary pressures, including commodity and labor costs [46][47] Question: What is the outlook for the second half of the fiscal year? - The company is cautious about the garden segment due to tough comparisons from last year, while remaining optimistic about the pet segment [54][55] Question: How is the company addressing labor availability issues? - The company is experiencing challenges in attracting and retaining hourly employees and is adjusting compensation to remain competitive [74]
Central Garden & Pet(CENTA) - 2021 Q2 - Earnings Call Transcript