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Central Garden & Pet (CENT) Q2 Earnings Beat, Margins Expand
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Central Garden & Pet Company (CENT - Free Report) came up with second-quarter fiscal 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. While net sales declined, earnings improved year over year owing to the Cost and Simplicity program.
Management has been taking steps to strengthen its position in the pet supplies and lawn and garden supplies space. Central Garden & Pet Company is focusing on brand building, containing costs, lowering complexity and improving margins. The company has been expanding its manufacturing capacity and simplifying its portfolio.
Let’s Delve Deeper
Central Garden & Pet reported adjusted quarterly earnings of 99 cents a share, which beat the Zacks Consensus Estimate of 83 cents. The bottom line improved sharply from the year-ago period’s earnings of 72 cents a share. The prior year’s number was adjusted for the February 2024 stock dividend.
Central Garden & Pet Company Price, Consensus and EPS Surprise
The company generated net sales of $900.1 million, which came ahead of the Zacks Consensus Estimate of $896 million. The metric declined 1% from the year-ago period. Organic net sales decreased 0.7%.
The adjusted gross profit came in at $281.4 million compared with $259.6 million reported in the year-ago period. The adjusted gross margin expanded 270 basis points to 31.3%, driven by the Cost and Simplicity program, including the sale of the independent garden channel distribution business and exit of some private-label pet bed product lines, as well as moderating inflation.
Adjusted SG&A expenses of $182.7 million increased from $181.6 million in the prior-year quarter. As a percentage of net sales, it deleveraged 30 basis points to 20.3%. We had anticipated SG&A expenses to deleverage 70 basis points.
The adjusted operating income totaled $98.7 million, significantly up from the $78 million reported in the year-ago period. The operating margin expanded 240 basis points to 11%, thanks to the higher gross margin. Adjusted EBITDA came in at $124.4 million compared with $106.9 million in the prior-year period.
Image Source: Zacks Investment Research
Segment Details
Net sales for the Pet segment came in at $480.2 million, showing a 1.1% increase compared to the previous year, driven by growth in Consumables businesses and the recent TDBBS acquisition. We had anticipated a 4.5% decline in segment sales. Organic net sales fell 3%, excluding the impact of the recent buyout of TDBBS.
The segment’s operating income came in at $63 million, up from $55 million reported in the prior-year quarter. Meanwhile, the operating margin expanded 140 basis points to 13%, driven by the improved gross margin.
In the Garden segment, net sales of $419.9 million declined 3.2% from the year-ago period. We had anticipated a 1.5% increase in segment sales. Organic net sales grew 1.9%, excluding the impact of the sale of the independent garden channel distribution business. Growth in Live Plants, Grass Seed and Controls & Fertilizer more than offset lower sales in Wild Bird.
The segment’s adjusted operating income of $62.3 million improved from an adjusted operating income of $49.6 million reported in the prior-year quarter. The adjusted operating margin expanded 340 basis points to 14.8%
Financial Details
Central Garden & Pet ended the quarter with cash and cash equivalents of $301.3 million, long-term debt of $1,189 million and shareholders’ equity of $1,510.8 million, excluding the non-controlling interest of $1.4 million.
The company did not repurchase shares during the quarter under review. Management incurred capital expenditures of $9 million during the quarter. It expects to incur a capital expenditure of $70 million in fiscal 2024.
Outlook
Central Garden & Pet continues to estimate fiscal 2024 adjusted earnings to be $2.00 per share or better ($2.50 or better before the February 2024 stock dividend). The projection indicates uncertain consumer demand and retailer dynamics and an environment of macroeconomic and geopolitical volatility. It also suggests modest pricing actions to help mitigate inflationary headwinds.
Here, we have highlighted other top-ranked stocks, namely Sprouts Farmers Market (SFM - Free Report) , Target Corporation (TGT - Free Report) and Tractor Supply Company (TSCO - Free Report) .
Sprouts Farmers, a renowned grocery retailer, holds a Zacks Rank #2. SFM has a trailing four-quarter earnings surprise of 9.2%, on average.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings suggests growth of around 8.1% each from the year-ago reported numbers.
Target, a general merchandise retailer in the United States, currently carries a Zacks Rank #2. TGT has a trailing four-quarter earnings surprise of 27.1%, on average.
The Zacks Consensus Estimate for Target’s current financial-year earnings suggests growth of around 5% from the year-ago reported numbers.
Tractor Supply, which operates as a rural lifestyle retailer in the United States, currently carries a Zacks Rank #2. Tractor Supply has a trailing four-quarter earnings surprise of 2.7%, on average.
The Zacks Consensus Estimate for Tractor Supply’s current financial-year sales and earnings suggests growth of 3% and 2.3%, respectively, from the year-ago reported numbers.
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Central Garden & Pet (CENT) Q2 Earnings Beat, Margins Expand
Central Garden & Pet Company (CENT - Free Report) came up with second-quarter fiscal 2024 results, wherein the top and bottom lines beat the Zacks Consensus Estimate. While net sales declined, earnings improved year over year owing to the Cost and Simplicity program.
Management has been taking steps to strengthen its position in the pet supplies and lawn and garden supplies space. Central Garden & Pet Company is focusing on brand building, containing costs, lowering complexity and improving margins. The company has been expanding its manufacturing capacity and simplifying its portfolio.
Let’s Delve Deeper
Central Garden & Pet reported adjusted quarterly earnings of 99 cents a share, which beat the Zacks Consensus Estimate of 83 cents. The bottom line improved sharply from the year-ago period’s earnings of 72 cents a share. The prior year’s number was adjusted for the February 2024 stock dividend.
Central Garden & Pet Company Price, Consensus and EPS Surprise
Central Garden & Pet Company price-consensus-eps-surprise-chart | Central Garden & Pet Company Quote
The company generated net sales of $900.1 million, which came ahead of the Zacks Consensus Estimate of $896 million. The metric declined 1% from the year-ago period. Organic net sales decreased 0.7%.
The adjusted gross profit came in at $281.4 million compared with $259.6 million reported in the year-ago period. The adjusted gross margin expanded 270 basis points to 31.3%, driven by the Cost and Simplicity program, including the sale of the independent garden channel distribution business and exit of some private-label pet bed product lines, as well as moderating inflation.
Adjusted SG&A expenses of $182.7 million increased from $181.6 million in the prior-year quarter. As a percentage of net sales, it deleveraged 30 basis points to 20.3%. We had anticipated SG&A expenses to deleverage 70 basis points.
The adjusted operating income totaled $98.7 million, significantly up from the $78 million reported in the year-ago period. The operating margin expanded 240 basis points to 11%, thanks to the higher gross margin. Adjusted EBITDA came in at $124.4 million compared with $106.9 million in the prior-year period.
Image Source: Zacks Investment Research
Segment Details
Net sales for the Pet segment came in at $480.2 million, showing a 1.1% increase compared to the previous year, driven by growth in Consumables businesses and the recent TDBBS acquisition. We had anticipated a 4.5% decline in segment sales. Organic net sales fell 3%, excluding the impact of the recent buyout of TDBBS.
The segment’s operating income came in at $63 million, up from $55 million reported in the prior-year quarter. Meanwhile, the operating margin expanded 140 basis points to 13%, driven by the improved gross margin.
In the Garden segment, net sales of $419.9 million declined 3.2% from the year-ago period. We had anticipated a 1.5% increase in segment sales. Organic net sales grew 1.9%, excluding the impact of the sale of the independent garden channel distribution business. Growth in Live Plants, Grass Seed and Controls & Fertilizer more than offset lower sales in Wild Bird.
The segment’s adjusted operating income of $62.3 million improved from an adjusted operating income of $49.6 million reported in the prior-year quarter. The adjusted operating margin expanded 340 basis points to 14.8%
Financial Details
Central Garden & Pet ended the quarter with cash and cash equivalents of $301.3 million, long-term debt of $1,189 million and shareholders’ equity of $1,510.8 million, excluding the non-controlling interest of $1.4 million.
The company did not repurchase shares during the quarter under review. Management incurred capital expenditures of $9 million during the quarter. It expects to incur a capital expenditure of $70 million in fiscal 2024.
Outlook
Central Garden & Pet continues to estimate fiscal 2024 adjusted earnings to be $2.00 per share or better ($2.50 or better before the February 2024 stock dividend). The projection indicates uncertain consumer demand and retailer dynamics and an environment of macroeconomic and geopolitical volatility. It also suggests modest pricing actions to help mitigate inflationary headwinds.
Shares of this Zacks Rank #2 (Buy) company have risen 22.9% in the past six months compared with the industry’s growth of 15.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Stocks Hogging in the Limelight
Here, we have highlighted other top-ranked stocks, namely Sprouts Farmers Market (SFM - Free Report) , Target Corporation (TGT - Free Report) and Tractor Supply Company (TSCO - Free Report) .
Sprouts Farmers, a renowned grocery retailer, holds a Zacks Rank #2. SFM has a trailing four-quarter earnings surprise of 9.2%, on average.
The Zacks Consensus Estimate for Sprouts Farmers’ current financial-year sales and earnings suggests growth of around 8.1% each from the year-ago reported numbers.
Target, a general merchandise retailer in the United States, currently carries a Zacks Rank #2. TGT has a trailing four-quarter earnings surprise of 27.1%, on average.
The Zacks Consensus Estimate for Target’s current financial-year earnings suggests growth of around 5% from the year-ago reported numbers.
Tractor Supply, which operates as a rural lifestyle retailer in the United States, currently carries a Zacks Rank #2. Tractor Supply has a trailing four-quarter earnings surprise of 2.7%, on average.
The Zacks Consensus Estimate for Tractor Supply’s current financial-year sales and earnings suggests growth of 3% and 2.3%, respectively, from the year-ago reported numbers.