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CENTRAL GARDEN & PET CO (CENT)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 delivered strong profitability despite softer sales: GAAP EPS $1.52 (+28% YoY) and non-GAAP EPS $1.56 (+18% YoY) on net sales of $960.9M (-4% YoY); gross margin expanded 280 bps to 34.6% from productivity and Cost & Simplicity initiatives .
  • EPS beat consensus; revenue missed: EPS $1.56 vs $1.43*; revenue $960.9M vs $996.1M*; management reaffirmed FY25 non-GAAP EPS outlook of approximately $2.60 (raised from $2.20+ earlier) .
  • Segment mix and margin quality improved: Garden operating margin expanded to 17.7% (GAAP), while Pet margins modestly contracted amid durables rationalization; consumables rose to 82% of Pet sales (from 79% YoY) .
  • Key catalysts and watch items: tariff cost impact skewed to Q4 (~$10M FY25, ~$3M Q3) with pricing actions and sourcing shifts underway; private label wins at big-box drive Garden momentum; share repurchases remain active (1.7M shares, $55M) .

What Went Well and What Went Wrong

What Went Well

  • Margin expansion and EPS growth: “meaningful margin expansion and year-over-year GAAP and non-GAAP earnings growth despite expected softer sales” (CEO) .
  • Garden execution and mix: Garden operating margin expanded 490 bps to 17.7% GAAP (310 bps to 18.2% non-GAAP) on productivity; Wild Bird, fertilizer, packet seed strength and private label gains supported performance .
  • Cost & Simplicity progress: Consolidation of outdated facilities into modern, DTC-enabled hubs (Salt Lake City) and footprint rationalization yielded efficiencies and safety improvements, with continued runway (management) .

What Went Wrong

  • Top-line pressure: Net sales declined 4% YoY, with Garden impacted by a late spring and loss of two third-party distribution product lines; Pet durables demand remained soft, compounded by assortment rationalization .
  • Pet margins contracted: Pet GAAP operating margin fell 90 bps to 15.5% (non-GAAP -60 bps to 15.8%) on lower volume and durables weakness; adjusted EBITDA declined $6M YoY .
  • Tariffs and retail environment: Management flagged heightened macro uncertainty, promotional intensity, and specialty pet channel pressure; tariff inflation expected to intensify, with most impact in Q4 (~$10M FY total, ~$3M recognized in Q3) .

Financial Results

Headline Metrics vs Prior Year and Prior Quarter

MetricQ3 2024Q2 2025Q3 2025
Revenue ($USD Millions)$996.3 $833.5 $960.9
GAAP EPS ($)$1.19 $0.98 $1.52
Non-GAAP EPS ($)$1.32 $1.04 $1.56
Gross Margin %31.8% 32.8% 34.6%
Operating Margin % (GAAP)11.6% 11.2% 14.1%
Net Income ($USD Millions)$79.7 $63.6 $95.0
Adjusted EBITDA ($USD Millions)$156.0 $123.3 $166.6

Consensus vs Actual (Q3 2025)

MetricConsensus*ActualBeat/Miss
EPS ($)$1.43*$1.56 Beat by $0.13*
Revenue ($USD Millions)$996.1*$960.9 Miss by $35.2M*

Values retrieved from S&P Global.*

Segment Performance (Q3 2025 vs Q3 2024)

Segment MetricQ3 2024Q3 2025
Pet: GAAP Operating Income ($M)$83.1 $76.2
Pet: Non-GAAP Operating Income ($M)$83.1 $77.9
Pet: GAAP Operating Margin %16.4% 15.5%
Pet: Non-GAAP Operating Margin %16.4% 15.8%
Pet: Adjusted EBITDA ($M)$94.0 $88.3
Garden: GAAP Operating Income ($M)$62.5 $83.0
Garden: Non-GAAP Operating Income ($M)$73.6 $85.2
Garden: GAAP Operating Margin %12.8% 17.7%
Garden: Non-GAAP Operating Margin %15.1% 18.2%
Garden: Adjusted EBITDA ($M)$84.6 $95.6

KPIs and Balance Sheet

KPIQ2 2025Q3 2025
Pet consumables mix (% of Pet sales)—82% (vs 79% YoY)
Pet e-commerce (% of Pet sales)27% 27%
Cash & Equivalents ($M)$517 $713
Total Debt ($B)$1.2 $1.2
Gross Leverage (x)2.9x 2.9x
Net Leverage (x)~1.7x ~1.2x
Cash from Operations (quarter, $M)$(47) used $265 provided
Inventory Reduction (quarter, $M)$90 $67
Share Repurchases1.2M sh/$41M (Q2) 1.7M sh/$55M (Q3)

Note: Management cited SG&A as 24.5% on the call; the 8‑K/press release shows 20.5% (197/960.9). Use 8‑K values as authoritative .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Non-GAAP EPSFY 2025$2.20 or better (Q1/Q2) Approximately $2.60 (raised July; reaffirmed Q3) Raised
Capital ExpendituresFY 2025$60–$70M (Q1) ~$60M (Q2) Tightened
Capital ExpendituresFY 2025~$60M (Q2) ~$50–$60M (Q3) Lowered
Outlook ExclusionsFY 2025Excludes tariff changes/M&A/restructuring Excludes tariff changes/M&A/restructuring Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Cost & Simplicity (footprint, logistics, SKU rat)Covington DC consolidation; UK wind-down; NJ DC; margin structurally higher Salt Lake City DTC hub; continued consolidation; margins expanded Improving
Tariffs & MitigationExposure ~14–15% of costs; pre-tariff inventory; actions on sourcing/pricing FY impact ~$10M (≈$3M in Q3, bulk Q4); pricing actions where needed Worsening near term
Pet Durables vs ConsumablesDurables declines improving sequentially; consumables grew; e-comm 28% Q1 Consumables 82% of Pet sales; e-comm 27%; durables down double digits Mix Improving
Garden Season & WeatherDelayed spring; POS down low single digits; Wild Bird tailwind Late spring impacted shipments; Wild Bird/fertilizer/packet seed strength; POS up low single digits QoQ Mixed
Private Label & Retailer ExecutionPicked up private label at big-box; margin accretive; capacity in place Additional stores awarded on execution; ongoing benefits into next year Improving
E-commerce & DigitalRecord online positions in Wild Bird/Grass Seed; DTC capabilities scaling Continued DTC expansion; Salt Lake hub; e-comm share stable in Pet Improving
M&A PipelineAnemic deal flow; disciplined focus on consumables; leverage headroom Acceleration targeted in 2026 as conditions improve Stable/Deferred

Management Commentary

  • “Our team’s dedication…through our Cost and Simplicity program—drove meaningful margin expansion and year-over-year GAAP and non-GAAP earnings growth despite expected softer sales.” — CEO Niko Lahanas .
  • “We are reaffirming our fiscal 2025 non-GAAP EPS guidance of approximately $2.6…even as we navigate a complex and fluid macroeconomic environment.” — CEO .
  • “We’ve reduced purchases from China by almost 50% in Q3 YoY…[expect] roughly $10M this year in total tariff impact with the bulk of that hitting in Q4.” — CFO Brad Smith .
  • “Consumables now represent 82% of total Pet sales…up from 79% a year ago.” — CFO .
  • “Categories that have driven our business overall this year…wild bird food…fertilizer…grass seed…packet seed.” — President Garden, J.D. Walker .

Q&A Highlights

  • Margin trajectory: Management emphasized ongoing runway in Cost & Simplicity (portfolio optimization, logistics, procurement) without setting margin targets; structural improvements continue .
  • Tariff impact & pricing: FY25 tariff cost $10M ($3M Q3, remainder Q4); pricing actions will be selective; larger benefits from sourcing changes expected in FY26 .
  • Pet trends: Durables declines largely from assortment rationalization and category softness; Aquatics cited; consumables stable and higher-margin mix accretive .
  • Garden private label wins: Incremental store awards into next year based on in-store execution; margin accretive despite lower gross margins .
  • E-commerce footprint: New Salt Lake DTC hub to cover >95% of U.S. in <2 days; primarily cost-out with potential service-driven sales lift .

Estimates Context

  • Q3 FY25 EPS beat by $0.13 vs consensus ($1.56 actual vs $1.43*), while revenue missed by $35.2M ($960.9M actual vs $996.1M*) with 6 EPS estimates and 5 revenue estimates contributing.*
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Quality over quantity: Despite a 4% revenue decline, gross margin (+280 bps) and operating margin (+250 bps) expanded materially—evidence that Cost & Simplicity is delivering sustainable margin lift .
  • Mix shift supports resilience: Consumables at 82% of Pet sales and private label gains in Garden underpin margin stability amid durables and weather headwinds .
  • Tariff timing matters for Q4: Expect cost pressure skewed to Q4; watch for pricing execution and further sourcing shifts; FY26 should reflect fuller mitigation .
  • Garden momentum beyond the season: Wild Bird and packet/fertilizer strength and private label wins should carry into FY26; loss of third-party lines laps in Q4 .
  • Strong cash and buybacks: $713M cash, 2.9x gross leverage (~1.2x net) and active repurchases provide capital allocation flexibility for M&A when deal flow improves .
  • Guidance credibility: Raised FY25 non-GAAP EPS to ~$2.60 in July and reaffirmed post-Q3, reflecting confidence despite macro/tariff uncertainty .
  • Trading lens: Near-term volatility around Q4 tariffs and top-line optics; focus on margin durability, mix, and capex discipline ($50–$60M) as supports for multiple .
Note: SG&A as % of sales was 20.5% in the 8‑K/press release; the call commentary referenced 24.5%, which appears to be a misstatement. Use filed figures as authoritative **[887733_0000887733-25-000028_q32025pressrelease.htm:0]** **[887733_0000887733-25-000028_q32025pressrelease.htm:4]**.