Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Central Garden & Pet Co (NASDAQ:CENT) reported a strong start to the fiscal year with growth in both earnings per share and net sales.
• Margins improved due to disciplined cost management and easing inflationary pressures.
• The company saw robust growth in e-commerce, reflecting enhanced digital capabilities.
• The new distribution center in Covington, Georgia, has increased efficiency and reduced the distribution footprint.
• CENT reaffirmed its fiscal 2025 guidance for non-GAAP EPS of $2.20 or higher, showing confidence in its strategy and outlook.

Negative Points

• CENT anticipates a softer second quarter compared to last year due to the timing of shipments and promotional activities.
• The company faces ongoing consumer pressure and a competitive marketplace driven by promotions.
• Challenges persist in the brick-and-mortar retail sector, particularly in the garden business.
• CENT expects continued volatility from extreme weather patterns, which could impact the garden season.
• The pet durable goods segment continues to face declines, partly due to competition from low-cost imports.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with CENT.

Q: Nico, was the strong quarter performance due to a pull forward of shipments, or was it unexpected? A: (CEO) It wasn't exactly as expected; it was more about timing rather than a pull forward. We had favorable weather, good execution, and some businesses loaded earlier than last year. Some of this will come out of Q2.

Q: Can you explain the impact of tariffs on your guidance and how you're managing it? A: (CFO) We've assessed the potential impact of tariffs on China, Canada, and Mexico. Given our exposure and mitigation strategies, we are comfortable that we can absorb these impacts and stay within our guidance.

Q: How is the de minimis exemption potentially closing affecting your pet category? A: (President of Pet Consumer Products) It's likely to affect the durable category the most. We hope it will level the playing field, but we still need to see how it plays out.

Q: Can you provide more details on the new distribution facility and its capacity for future growth? A: (CEO) The new facility is state-of-the-art, replacing seven older ones. It primarily handles garden products now, but we plan to distribute both pet and garden products from it, enhancing efficiency and agility.

Q: What percentage of your products are sourced from China, Mexico, and Canada, and how does this relate to tariffs? A: (CFO) About 4% of our products come from China, and 2% from Canada and Mexico combined. Another 8% comes from other countries, totaling around 15% of our costs from abroad.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.