Central Garden & Pet Company (CENT) Q4 2025 Earnings Call Transcript
Net Sales $3.1 billion, a decrease of 2% year-over-year. The decline was driven by the proactive decision to reduce exposure to lower-margin businesses and the transition of two third-party product lines in the garden distribution business to a direct-to-retail model.
Non-GAAP Gross Profit $1 billion, up 4.5% year-over-year. This increase was largely supported by productivity initiatives.
Non-GAAP Gross Margin 32.1%, an expansion of 210 basis points year-over-year. This was supported by productivity initiatives across both segments.
Non-GAAP SG&A Expense $738 million, roughly in line with the prior year. As a percentage of sales, it was 23.6% compared to 23% last year, mostly due to lower volume and the sequencing of productivity and commercial investments.
Non-GAAP Operating Income $265 million, an increase from $223 million year-over-year. This was supported by structural cost improvements and strong execution.
Non-GAAP Operating Margin 8.5%, an expansion from 7% year-over-year. This was supported by structural cost improvements and strong execution.
Non-GAAP Net Income $174 million, up 22% year-over-year. This was driven by strong operational performance and cost management.
Non-GAAP Earnings Per Share $2.73, up $0.60 year-over-year. This increase reflects strong operational performance and cost management.
Adjusted EBITDA $371 million, compared to $334 million year-over-year. This reflects improved operational performance.
Cash Flow from Operations $333 million, compared to $395 million year-over-year. This decrease was due to lower net income and changes in working capital.
CapEx $41 million, about 4% lower than last year. This reflects prudent investments primarily in productivity-enhancing initiatives and essential maintenance projects.
Depreciation and Amortization $85 million, 7% below prior year. This aligns with the focus on efficient capital deployment.
Cash and Cash Equivalents $882 million, up $129 million year-over-year. This reflects strong liquidity and consistent cash generation.
Total Debt $1.2 billion, unchanged from the prior year. Gross leverage ended the year at 2.8x, below last year and the target range of 3 to 3.5x.
Net Sales (Pet Segment) $428 million, a decrease of 2% year-over-year. This was due to the closure of UK operations and lower durable sales, offset by strong growth in Animal Health businesses.
Non-GAAP Operating Income (Pet Segment) $31 million, compared to $35 million year-over-year. This decrease was due to slightly lower volumes and timing of investments.
Net Sales (Garden Segment) $250 million, a 7% increase year-over-year. This was driven by an extended selling season, improved sell-through, and strong retail execution.
Non-GAAP Operating Income (Garden Segment) $1 million, an increase of $26 million year-over-year. This was supported by strong sales and operational improvements.
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Central Garden & Pet Appoints New Chief Legal Officer
- Executive Appointment: Central Garden & Pet Company has appointed Apur Patel as the new Chief Legal Officer, effective January 26, 2026, aiming to align legal matters closely with corporate strategy.
- Succession Context: Patel succeeds the retiring George Yuhas, who served as interim Chief Legal Officer during the transition, highlighting the company's commitment to a smooth executive handover.
- Extensive Experience: With over 30 years of global legal experience, Patel previously served as Vice President & Deputy General Counsel at Clorox, leading a team of over 20 legal professionals, showcasing his ability to manage legal risks in complex global organizations.
- Strategic Vision: Patel expressed excitement about building a strong legal foundation at Central and collaborating with CEO Niko Lahanas and the leadership team to support the company's long-term success and value creation.
JPMorgan Downgrades CENTA and HNST Ratings, Mixed Outlook Ahead of Earnings
- Rating Downgrade: JPMorgan downgraded Central Garden & Pet (CENTA) from Neutral to Underweight due to subdued demand in the pet category, projecting low single-digit sales and EPS growth, which reflects the company's reliance on the U.S. consumer and market uncertainties.
- Increased Competitive Pressure: The firm issued a double downgrade for The Honest Company (HNST) from Overweight to Underweight, primarily due to heightened competition in the diaper market, which is expected to necessitate increased price promotions to maintain market share, impacting profitability.
- Market Reaction: Following the downgrades, CENTA shares fell 3.3% in early Friday afternoon trading, while HNST shares dropped 3.1%, indicating heightened investor concerns about future performance and reflecting a cautious sentiment towards household personal care stocks.
- Strategic Adjustments: The Honest Company is implementing a new productivity program that involves exiting lower-margin, non-strategic categories and channels, which, while aimed at improving efficiency, also necessitates finding new revenue sources to offset potential income losses, increasing future growth uncertainties.
