Weak demand drives 4% drop in Central’s pet sales

Central Garden & Pet reported a 4% slip in net sales to $961 million (€884M) for the third quarter of its fiscal year (FY) 2025, ending 28 June.

Net sales from its pet segment saw a slight dip of 3% to $493 million (€454M), primarily due to assortment rationalization and softer demand in durable pet products during the quarter.

Operating income dropped 8% year-over-year (YoY) to $76 million (€70M) and operating margin contracted by 90 basis points to 15.5%.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter stood at $88 million (€81M), $6 million lower compared to the same period last year.

“We’re proud of our solid third-quarter performance, which reflects the strength of our strategic priorities in action,” says Niko Lahanas, CEO of Central Garden & Pet.

The Californian company recognized an incremental expense of $1.7 million (€1.5M) in its pet segment related to the decision to wind down its UK operations, which it started earlier this year. Central aims to transition to a direct-export model for customers in the UK and select other European markets.

For the first 9 months of FY2025, net sales accounted for $2.5 billion (€2.1B).

Cost and Simplicity Program

The American corporation says it continues to make solid progress on its multi-year Cost and Simplicity Program.

According to the company, this program features a set of initiatives across procurement, manufacturing, logistics, portfolio management and administrative spending, focused on streamlining operations, boosting efficiency and simplifying the organization at every level.

During the same period, the company says it began to consolidate 2 outdated garden distribution facilities in Ontario, California, and Salt Lake City, Utah, into a larger, modern facility in Salt Lake City, which resulted in the Garden segment incurring a charge of $2.2 million (€2M) in Q3.

“Our team’s dedication, collaboration across business units and strong execution, especially through our Cost and Simplicity Program, drove meaningful margin expansion and year-over-year GAAP and non-GAAP earnings growth despite expected softer sales,” Lahanas says. “Even in the face of broader macroeconomic and geopolitical uncertainty, we continue to deliver on our Central to Home strategy with excellence and consistency.”

Yearly guidance

For the full year 2025, Central Garden & Pet expects a non-GAAP (Generally Accepted Accounting Principles) earnings per share of approximately $2.60 (€2.40).

The company notes that this outlook reflects an expected shift in consumer behavior amid macroeconomic and geopolitical uncertainty, challenges within the brick-and-mortar retail landscape and uncertainty about the duration of the garden selling season for the remainder of the fiscal year.

For capital expenditures, it anticipates approximately $50 million (€46M) to $60 million (€55M).

“This outlook excludes the potential impact from further changes in tariff rates, or from acquisitions, divestitures or restructuring activities that may occur during fiscal 2025, including initiatives associated with the Cost and Simplicity Program,” the company concludes.