Central Garden & Pet Company

Net sales were $906 million, up 9% year over year. Gross profit was $300 million versus $273 million, and gross margin improved 30 basis points to 33.1%; excluding a prior-year U.K. inventory charge, gross margin was essentially flat year over year. SG&A was $186 million, or 20.5% of sales versus 21.6% last year, and operating income was $114 million versus $93 million. Net income was $79 million versus $64 million, and diluted EPS was a record $1.28 versus the prior year; adjusted EBITDA was $139 million versus $123 million, with margin at 15.4% versus 14.8%. Pet sales were $477 million, up 5%, with operating income of $78 million and operating margin of 16.3%; Garden sales were $425 million, up 13%, with operating income of $66 million and operating margin of 15.4%. For the first half, sales were up 2%, gross margin increased 70 basis points, and operating income grew 8%. Full-year fiscal 2026 non-GAAP diluted EPS guidance was reiterated at $2.70 or better. Management said the Phillips JV should reduce second-half reported revenue by a low-teens percentage, while Brad Smith said the back-half financial impact is conservatively $0.03 to $0.05 per share dilutive.

Niko Lahanas framed the quarter as a record result driven by better execution, simplification, and operating discipline, saying the company is becoming more efficient and resilient. He emphasized portfolio actions like moving DoMyOwn into Covington, consolidating TDBBS manufacturing, and forming the Phillips JV as steps to reduce complexity and focus on higher-margin branded growth. His tone was positive but measured on the outlook, repeatedly noting that the business is weather-dependent and that management wants to see May before getting more aggressive on guidance.

Brad Smith highlighted strong operating leverage and profitability: sales of $906 million, gross margin of 33.1%, SG&A at 20.5% of sales, operating margin of 12.6%, and record Q2 EPS of $1.28. He also noted adjusted EBITDA of $139 million, cash used by operations of $50 million, capex of $10 million, and quarter-end cash and short-term investments of $653 million, up $137 million despite the Champion USA acquisition. He said gross leverage ended at 2.8x, net leverage was about 1.3x, there were no borrowings on the credit facility, and the company expects capex of about $50 million to $60 million this fiscal year. On the JV, he said the business was a small profit contributor before the deal, the equity method and purchase accounting will initially weigh on earnings, and the back-half impact should be $0.03 to $0.05 per share dilutive.

Analysts focused on Garden sell-through, second-half EPS potential, Pet growth durability, the rationale for the distribution JV, inflation in raw materials, and consumer/value trends. Management said Garden consumption improved in March and April as weather turned favorable, but May is still the key month and they remain cautiously optimistic rather than raising guidance now. On Pet, management said the category appears to have stabilized, consumables were up mid-single digits, and growth was helped by timing, while durables were boosted by cushions shifting from Q1 to Q2. On the JV, they said the move was driven by complexity reduction, better strategic fit, and preserving access to the channel through a 20% stake, but near-term earnings will be slightly dilutive because the legacy business had some profit and the new venture will take time to realize synergies.