Central Garden & Pet’s first quarter results reflected a decline in sales, which management attributed to the earlier timing of preseason orders, unseasonably cold and wet weather delaying the garden season, and the loss of key product lines in its third-party distribution business. Despite these headwinds, CEO Niko Lahanas highlighted strong execution in cost management and operational efficiency, which drove margin expansion and record non-GAAP operating income in the Pet segment. The Wild Bird business also stood out, benefiting from colder weather and achieving record sales. Management acknowledged a more promotional retail environment and increased consumer focus on value, especially in categories experiencing trade-down behaviors.
Is now the time to buy CENT? Find out in our full research report (it’s free).
Central Garden & Pet (CENT) Q1 CY2025 Highlights:
- Revenue: $833.5 million vs analyst estimates of $878.8 million (7.4% year-on-year decline, 5.1% miss)
- Adjusted EPS: $1.04 vs analyst estimates of $0.93 (11.6% beat)
- Adjusted EBITDA: $119.3 million vs analyst estimates of $114.5 million (14.3% margin, 4.2% beat)
- Management reiterated its full-year Adjusted EPS guidance of $2.20 at the midpoint
- Operating Margin: 11.2%, in line with the same quarter last year
- Market Capitalization: $2.10 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Central Garden & Pet’s Q1 Earnings Call
- Bill Chappell (Truist Securities) asked about trends in Pet durables versus consumables and expectations for tariff impacts; President John Hanson explained consumables are stable and margin accretive while durables face ongoing weakness, with tariff mitigation plans underway but most changes not impacting results until late 2025.
- Brad Thomas (KeyBanc Capital Markets) inquired about the delayed garden season and live goods outlook; President J.D. Walker said improved weather is driving better consumption, and proactive SKU rationalization has positioned live goods for a stronger year if favorable trends persist.
- Jim Chartier (Monness, Crespi, Hardt) questioned the effect of the removal of the de minimis tariff exclusion on Pet imports; Hanson noted it is too early to quantify the impact but expects cost increases on low-priced imports could benefit Central in durables.
- Peter Lukas (CJS Securities) probed for evidence of consumer trade-down to private label and Central’s margins on such products; CEO Niko Lahanas confirmed trade-down especially in Wild Bird, and said private label products can deliver comparable operating margins to branded goods due to lower marketing expenses.
- Brian McNamara (Canaccord Genuity) asked if recent margin gains are sustainable; Lahanas said structural efficiency improvements and product mix changes support higher margins, with further gains possible as the Cost and Simplicity program progresses.
Catalysts in Upcoming Quarters
In coming quarters, our analyst team will be watching (1) how effectively Central manages tariff-related supply chain changes and implements price adjustments, (2) whether consumer trade-down and promotional activity intensifies in core categories, and (3) the pace and sustainability of margin expansion from ongoing Cost and Simplicity initiatives. Progress on e-commerce growth and private label expansion will also be important indicators of competitive positioning.
Central Garden & Pet currently trades at $36.49, up from $34.46 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).
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