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Central Garden & Pet (CENT) Solid on Digital & Buyout Plans

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Central Garden & Pet Company (CENT - Free Report) looks well poised for growth, courtesy of its robust business strategies. The company has been developing new products, advancing digital capabilities, optimizing supply chain and focusing on marketing activities. It partnered with a leading e-commerce platform Profitero, Inc. to cash in on the evolving digital capabilities. In addition, it is making constant efforts to reinforce its position in the pet supplies, and lawn and garden supplies space via prudent acquisitions. Also, the company’s Central-to-Home strategy bodes well.

Buoyed by such endeavors, the company continued its stellar performance in second-quarter fiscal 2021 wherein both the top and the bottom line not only surpassed the Zacks Consensus Estimate but also improved year over year. Notably, the quarter marked its sixth straight earnings beat. Further, the top line surged 33% year over year, benefiting from organic growth of 23% along with contributions from the recent buyouts worth $76 million. The company’s Pet as well as Garden divisions are also performing well. Given its sturdy first-half performance, management envisions fiscal 2021 adjusted earnings to be at or above $2.42, higher than $2.26 a share earned last fiscal.

Central Garden & Pet’s shares have soared 63.4% over the course of a year against the industry’s 10% decline.

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Let’s Find Out More

Central Garden & Pet is experiencing a sturdy performance across both its Pet and Garden units in the e-commerce channel, which comprises pure play, omni-channel and direct-to-consumer. Meanwhile, the partnership with Profitero enables Central Garden & Pet with a full view of its e-commerce business across eight retail partners. The company is able to utilize Profitero’s digital shelf analytics and share data capabilities to augment its online strategy. This helps strengthening the digital supply chain and product content, thereby optimizing retail media campaigns. Additionally, the acquisition of advances the company’s digital capabilities to deliver a strong omni-channel performance.

Coming to its buyout strategy, Central Garden & Pet is a disciplined buyer in the garden and pet areas. Via strategic buyouts, management is constantly enhancing the company’s manufacturing capabilities, operating synergies, distribution network, economies of scale and market advantages. These integrations are widening the company’s customer base, helping it capture a greater market share.

Over the years, the company has bought several businesses including entering into the live plant and outdoor seat cushion businesses. In this regard, Central Garden & Pet acquired C&S Products in May 2019, which has been complementing its existing wild bird feed business ever since. This takeover is also steadily boosting the company’s top line. In December, 2020, it acquired the live goods grower Hopewell Nursery. It also concluded the buyout of Green Garden Products, which is a key provider of vegetables, seed starters, herb and flower seed packets plus plant nutrients across North America. It also purchased the remaining 55% stake at Arden Companies in February 2019. Earlier, the company bought Bell Nursery, a leading grower and distributor of live flowers and plants in March 2018 while in the same year in April, it acquired General Pet Supply, a supplier of pet food and supplies.

Well, the previous estimates suggest that the net impact of acquisitions of, Hopewell Nursery and Green Garden Products will be accretive to the company’s fiscal 2021 earnings in the band of 11-16 cents a share. During the second quarter of fiscal 2021, the same contributed 7 cents to earnings per share.

Wrapping Up

Certainly, all the aforesaid efforts speak volumes for the company. On the flip side, headwinds, such as higher labor and freight costs, key commodity prices and the resumption of promotional activity to more normal levels are likely to hurt the company’s margins. Again, in supply chain, the company may continue to experience increased operational and logistics costs alongside witnessing deleveraged SG&A expenses.

Nonetheless, Central Garden & Pet is making efforts to lower costs in a bid to improve margins and fuel growth. The currently Zacks Rank #3 (Hold) company’s strategic efforts are also fruitful.

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