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Shares of Central Garden & Pet Company (CENT - Analyst Report) fell 9.4% in the after-hours trading session following the company’s dismal fourth-quarter and full-year 2013 results. The company’s fourth-quarter fiscal 2013 adjusted loss of 31 cents per share was wider than the Zacks Consensus Estimate of loss of 23 cents and loss of 21 cents reported in the year-ago quarter.

Including $7.7 million of one-time goodwill impairment charges, loss came in at 47 cents.

For fiscal 2013, Central Garden reported adjusted loss per share of 11 cents versus earnings of 44 cents in the prior-year quarter.  

The company’s top line decreased 7.1% year over year to $368.8 million in the fourth quarter and missed the Zacks Consensus Estimate of $396 million. For fiscal 2013, the top line fell 2.7% from the last year to $1,653.6 million.

Disappointing performance of the garden segment led to a 22.6% decline in consolidated gross profit to $81.3 million, while gross margin decreased approximately 450 basis points (bps) to 22.0%.

Lower gross profit led to substantial increase in operating loss. The company reported operating loss of $26.4 in the fourth quarter, wider than the operating loss of $8.5 million reported in the prior year quarter. The operating loss for the quarter under review includes goodwill impairment charge of $7.7 million.

Segment Details

The Pet segment’s net sales decreased 7% year over year to $220.4 million. The segment’s branded product sales fell 8% to $175.6 million, whereas sales of other manufacturers’ products decreased 2% to $44.8 million in the quarter. Gross margin expanded 230 bps. The segment’s operating income increased nearly 50.0% year over year to $24.7 million, whereas operating margin increased 430 bps due to higher profits in Dog & Cat and wild bird feed businesses.

Revenues at the Garden segment decreased 7% year over year to $148.4 million, reflecting a lesser week as compared with the prior-year quarter. The Garden segment’s branded product sales decreased 9% to $128.1 million, while sale of other manufacturers’ products increased 5% to $20.3 million in the quarter. The segment reported an operating loss of $30.8 million, as against $7.7 million of operating loss reported in the prior-year quarter.

Other Financial Details

This Zacks Rank #3 (Hold) company ended the year with cash and cash equivalents of $15.2 million, total debt of $472.6 million and shareholders’ equity of $468.7 million, excluding non-controlling interest of $1.3 million. The leverage ratio was 4.9x for the quarter. The company incurred capital expenditures of $6 million for the said quarter and $25 million for fiscal 2013.

For fiscal 2013, Central Garden reported cash used in operating activities at $28 million.

Central Garden replaced its existing credit facility of $375 million on Dec 5 with a $390 million senior secured asset-based revolving credit facility (ABL Revolver). The new credit facility has a 5-year tenure and matures in Dec 2018.

Other Stocks to Consider

Some better-ranked stocks in the retail sector that look promising include NUTRISYSTEM, INC. (NTRI - Snapshot Report), Jarden Corp. (JAH - Snapshot Report) and Conns Inc. (CONN - Snapshot Report). While Conns carries a Zacks Rank #1 (Strong Buy), Nutrisystem and Jarden have a Zacks Rank #2 (Buy).
 

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