Central Garden & Pet Company

Second-quarter net sales were $906 million, up 9% year over year. Gross profit was $300 million versus $273 million last year, 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, up 3%, and operating income rose to $114 million from $93 million, with operating margin improving to 12.6% from 11.2%. Net income was $79 million versus $64 million, and diluted EPS was a record $1.28. Adjusted EBITDA was $139 million versus $123 million. For the first half, sales were up 2%, gross margin increased 70 basis points, and operating income grew 8%. Forward guidance was maintained for fiscal 2026 non-GAAP diluted EPS of $2.70 or better, excluding future acquisitions, divestitures, or restructuring actions. Management said the JV should reduce second-half reported revenue by a low-teens percentage with minimal earnings impact on the core business, but Brad Smith said the net impact to Central in the back half is conservatively $0.03 to $0.05 per share dilutive.

Niko Lahanas framed the quarter as a record second quarter and first half, emphasizing improved execution, simplification, and stronger operating leverage. He highlighted moves to streamline the business, including shifting DoMyOwn into the Covington fulfillment center, consolidating TDBBS manufacturing, and forming the Phillips JV to reduce complexity and focus on higher-margin branded growth. His tone was confident but cautious: he repeatedly noted that the business is weather-dependent and that May remains critical before the company would consider raising guidance.

Brad Smith emphasized the hard numbers behind the quarter: $906 million in sales, $300 million in gross profit, 33.1% gross margin, $114 million in operating income, $79 million in net income, and $1.28 diluted EPS. He noted SG&A declined to 20.5% of sales from 21.6% despite a 3% increase in dollars, and adjusted EBITDA rose to $139 million with a 15.4% margin. On cash and capital allocation, he said operations used $50 million of cash, CapEx was $10 million, the company repurchased about 110,000 shares for $3.4 million, and cash and short-term investments ended at $653 million with no borrowings outstanding under the credit facility. He also said gross leverage was 2.8x and net leverage about 1.3x, below the target range.

Analysts focused on spring sell-through, the durability of Pet growth, the impact of the Phillips JV, and garden input costs. Management said sell-through in April remained strong where weather cooperated, but reiterated that May is the key month and that they want more visibility before changing guidance. On Pet, management said the category appears stabilized, growth was helped by both timing and stronger organic consumables, and they remain cautiously optimistic. On the JV, management said the decision was driven by simplification, margin transparency, and better strategic focus, while Brad Smith said the accounting and loss of the lower-margin business make the back-half impact modestly dilutive.