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CENTRAL GARDEN & PET CO (CENT)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was weak: net sales fell 11% to $669M, GAAP gross margin contracted 110 bps to 25.2%, and GAAP EPS was a loss of $0.51 as Garden absorbed a grass seed inventory impairment; non-GAAP loss per share was $0.18 .
  • FY 2024 non-GAAP EPS rose to $2.13, surpassing prior guidance of “$2.00 or better,” aided by record operating cash flow ($395M) and continued gross margin expansion to 30.0% non-GAAP (+110 bps) .
  • Management guided FY 2025 non-GAAP EPS to $2.20 or better and capex of $60–$70M; Q1 FY 2025 non-GAAP loss per share expected to be $0.05 or better. Pricing is expected to be net negative amid deflationary commodities and a more promotional retail environment .
  • Catalysts: e-commerce mix reached a record 29% of Pet sales in Q4, continued Cost & Simplicity execution (11 facilities closed in FY 2024), strong liquidity ($754M cash) and buybacks ($61M through Nov 21), and stated willingness to lever >4x for accretive M&A .

What Went Well and What Went Wrong

What Went Well

  • Cost & Simplicity delivered margin progress: FY non-GAAP gross margin expanded to 30.0% (+110 bps), with FY non-GAAP operating margin at 7.0% (vs. 6.9% LY) despite lower sales .
  • Record operating cash flow ($395M) and cash balance ($754M), with inventories down and no revolver borrowings; ample M&A firepower .
  • Pet segment: branded consumables outperformed, e-commerce mix reached 29% (+400 bps YoY), and market share held/gained in several categories (rawhide, treats, bird) .
    • “We delivered growth in non-GAAP EPS, successfully expanded our gross margin… and achieved a record-breaking cash flow year” — CEO Niko Lahanas .

What Went Wrong

  • Garden segment pressured by grass seed inventory impairment, driving Q4 non-GAAP operating margin to -10.6% (vs. -2.0% LY); segment adjusted EBITDA swung to -$14M from +$6M LY .
  • Durable Pet products remained soft; company is rationalizing and exiting low-profit SKUs, which will pressure durable share near term .
  • Promotional and pricing environment: “Pricing next year will be very, very tough… we’re actually net negative on price,” intensifying margin protection emphasis .

Financial Results

Quarterly Sequential Comparison (oldest → newest)

MetricQ3 2024Q4 2024
Revenue ($USD Millions)$996 $669
GAAP EPS ($USD)$1.19 $(0.51)
Non-GAAP EPS ($USD)$1.32 $(0.18)
GAAP Gross Margin %31.8% 25.2%
Non-GAAP Gross Margin %32.7% 26.0%
GAAP Operating Margin %11.6% (4.8)%
Non-GAAP Operating Margin %12.8% (1.7)%
Adjusted EBITDA ($USD Millions)$156 $17

Q4 YoY Comparison (oldest → newest)

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$750 $669
GAAP EPS ($USD)$0.04 $(0.51)
Non-GAAP EPS ($USD)$0.08 $(0.18)
GAAP Gross Margin %26.3% 25.2%
Non-GAAP Gross Margin %26.6% 26.0%
GAAP Operating Margin %1.2% (4.8)%
Non-GAAP Operating Margin %1.6% (1.7)%
Adjusted EBITDA ($USD Millions)$42 $17

Segment Breakdown (Q4; oldest → newest)

Segment MetricQ4 2023Q4 2024
Pet Net Sales ($USD Millions)$483 $435
Pet GAAP Operating Income ($USD Millions)$43.2 $14.3
Pet GAAP Operating Margin %9.0% 3.3%
Pet Non-GAAP Operating Income ($USD Millions)$47.8 $34.6
Pet Non-GAAP Operating Margin %9.9% 8.0%
Pet Adjusted EBITDA ($USD Millions)$58.2 $45.4
Garden Net Sales ($USD Millions)$267 $234
Garden GAAP Operating Income (Loss) ($USD Millions)$(3.4) $(28.8)
Garden GAAP Operating Margin %(1.3)% (12.3)%
Garden Non-GAAP Operating Income (Loss) ($USD Millions)$(5.3) $(24.9)
Garden Non-GAAP Operating Margin %(2.0)% (10.6)%
Garden Adjusted EBITDA ($USD Millions)$5.6 $(13.5)

FY 2024 KPIs (oldest → newest)

MetricFY 2023FY 2024
Revenue ($USD Millions)$3,310 $3,200
GAAP EPS ($USD)$1.88 $1.62
Non-GAAP EPS ($USD)$2.07 $2.13
GAAP Gross Margin %28.6% 29.5%
Non-GAAP Gross Margin %28.9% 30.0%
Non-GAAP Operating Margin %6.9% 7.0%
Adjusted EBITDA ($USD Millions)$343 $334
Cash from Operations ($USD Millions)$382 $395
Cash & Equivalents ($USD Millions, YE)$489 $754
Total Debt ($USD Millions, YE)$1,200 $1,200
Gross Leverage (x)3.1x 3.1x
Share Repurchases ($USD Millions)$37 (FY2023) $61 (Q4+$post-FY)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Non-GAAP EPSFY 2025N/A$2.20 or better New
CapexFY 2025N/A$60–$70M New
Non-GAAP EPSQ1 FY 2025N/ALoss of $0.05 or better New
Non-GAAP EPSFY 2024$2.00 or better (post stock dividend) Actual: $2.13 Beat vs guidance

Management emphasized pricing headwinds and a more promotional environment, implying top-line caution without specific revenue guidance .

Earnings Call Themes & Trends

TopicQ2 2024 (May)Q3 2024 (Aug)Q4 2024 (Nov)Trend
Pet Durables vs. ConsumablesDurables soft; consumables resilient; Pet e-comm ~25% of sales Pet operating margin up; consumables growth; pottery exit costs; guided grass seed write-down Durables down double digits; consumables POS positive; e-comm hit 29% of Pet sales Durables weak; consumables steady; e-comm mix rising
Pricing/PromotionsModerating inflation; cautious on promotions Competitive promos noted Pricing “net negative” in FY25; more promotional marketplace expected Tight pricing, heavier promos
Garden Weather/Live GoodsMixed weather; bird feed down; inventories normalized Garden margins down on live plants; anticipated seed write-down Grass seed impairment (high end $19M); cautious spring outlook but optimistic on POS Weather volatility ongoing; targeted network optimization
Cost & SimplicityNetwork consolidation; manufacturing CoEs; Chico closure Pottery wind-down; one-time charges 11 facilities closed in FY24; more consolidations in FY25 Multi-year execution continuing
Tariffs/International SourcingN/AN/AChina exposure now <5% of COGS; tariff scenarios monitored Lower direct tariff exposure vs past
M&A & LeverageActive pipeline focusMaintained liquidity and leverage targets Comfortable >4x leverage with path back to 3–3.5x; deal flow expected to improve Prepared to lean into accretive M&A

Management Commentary

  • Strategy and resilience: “We delivered growth in non-GAAP EPS, successfully expanded our gross margin… and achieved a record-breaking cash flow year” — CEO Niko Lahanas .
  • FY25 pricing outlook: “Pricing next year will be very, very tough… we’re actually net negative on price” — CEO Niko Lahanas .
  • Pet channel mix: “E-commerce as a percentage of total pet sales reached a record high of 29%” — CFO Brad Smith .
  • Garden impairment: Grass seed inventory write-down came “on the high end of the range… $19 million” — CEO Niko Lahanas .
  • Balance sheet and buybacks: “We purchased approximately 1.7 million additional shares for roughly $52 million through November 21… no borrowings under our $750 million credit facility” — CFO Brad Smith .

Q&A Highlights

  • Pet durables remain pressured; company is rationalizing low-margin SKUs and expects to lose durable share in FY25 while focusing on consumables growth .
  • Garden spring sell-in: customers plan early store loads; management “cautiously optimistic” for live goods after weather-hit FY24; POS trends improved exiting Q4 .
  • Tariffs: China-related COGS exposure now below 5%; mitigation levers include in-sourcing, re-sourcing, vendor cost reductions; monitoring potential new tariffs .
  • Promotional intensity: competitive promotional calendar expected in FY25 across channels, adding margin pressure .
  • M&A/leverage: willing to go >4x leverage with clear path back to 3–3.5x; seeking high-growth, margin-accretive consumables; prefer less seasonality in targets .

Estimates Context

  • Wall Street consensus from S&P Global (EPS, revenue) for Q4 2024 was not retrievable due to SPGI daily limit; therefore, explicit comparison to consensus is unavailable at this time. Values retrieved from S&P Global are unavailable due to system limits.
  • Implication: Given the Q4 miss driven by Garden impairment and soft durables, near-term estimate revisions may reflect lower Garden margins and cautious top-line/pricing assumptions; FY25 consensus could cluster near the new guidance floor ($2.20 non-GAAP EPS) until visibility on pricing/promos and weather improves .

Key Takeaways for Investors

  • FY24 execution was strong on cash generation and margins despite Q4’s impairment; non-GAAP EPS exceeded guidance, underscoring operating discipline .
  • Q4 weakness was concentrated in Garden (grass seed write-down) and Pet durables; expect continued durable pressure and promotional headwinds in FY25, making cost actions critical .
  • Digital is a differentiator: Pet e-commerce mix reached 29%, with fulfillment capabilities scaling across businesses, supporting share gains and channel shift .
  • Liquidity positions CENT to be opportunistic in M&A; management is willing to lever >4x for accretive consumables deals with a plan to de-lever back to 3–3.5x .
  • FY25 setup: non-GAAP EPS $2.20+ and capex $60–$70M; watch Q1 seasonality (-$0.05 or better) and early spring sell-in dynamics to gauge Garden trajectory .
  • Risk monitors: tariffs (albeit lower direct exposure), pricing/promotions, weather volatility, and durable category softness; Cost & Simplicity remains the key offset .
  • Actionable: Favorable risk-reward hinges on sustained margin protection and e-comm growth; track Garden POS/seed markets and Pet consumables momentum; reassess into spring after Q1 update .