Pet company Central Garden & Pet (NASDAQ: CENT) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 7.4% year on year to $833.5 million. Its non-GAAP profit of $1.04 per share was 11.6% above analysts’ consensus estimates.

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StockStory’s Take

Central Garden & Pet’s latest quarterly results were shaped by shifting seasonal dynamics and ongoing efforts to optimize the business portfolio. Leadership attributed softer sales to the earlier timing of customer orders and promotional events, which pulled demand into the prior quarter, as well as unfavorable weather that delayed the start of the garden season. CEO Niko Lahanas explained, “the earlier timing of preseason orders and promotional events shifted sales forward into the first quarter, leading to softer sales during the second quarter.” Despite these headwinds, management highlighted the strong performance of the Wild Bird segment and double-digit e-commerce growth as bright spots. Strategic SKU rationalization and cost discipline contributed to margin improvements, and the company continued to streamline operations, including winding down its UK presence in favor of a direct export model.

Looking ahead, Central Garden & Pet’s outlook reflects both caution and targeted investment in areas with high potential. Management reaffirmed its full-year non-GAAP EPS guidance despite acknowledging increased macroeconomic uncertainty due to tariffs and ongoing geopolitical tensions. Lahanas noted, “recent tariff actions and related geopolitical tensions have significantly increased macroeconomic uncertainty and weighed on consumer confidence.” The company expects heightened inflationary pressures, particularly in the Pet segment, and is preparing for a more promotional retail environment. Leadership plans to prioritize cost management while investing in e-commerce, digital technology, and further productivity initiatives, emphasizing the importance of agility as weather patterns and consumer behavior remain unpredictable.

Key Insights from Management’s Remarks

Management tied the quarter’s performance to operational streamlining, portfolio simplification, and targeted investments in logistics and e-commerce, which helped offset external pressures like weather and shifting consumer demand.

• SKU Rationalization Efforts: Central Garden & Pet accelerated the exit of lower-margin and underperforming product lines, especially in the Pet segment’s durable goods, which management cited as a key factor in supporting margins and profitability amid softer demand.

• Wild Bird Segment Outperformance: The Wild Bird business benefited from prolonged cold weather, driving record sales and mitigating some of the seasonal softness seen in traditional garden categories. This segment also contributed to share gains in both online and brick-and-mortar channels.

• E-Commerce and Digital Expansion: E-commerce sales saw continued double-digit growth, with enhanced digital capabilities, new product launches, and optimized retail media fueling higher engagement and improved conversion rates across Pet and Garden categories.

• Distribution and Logistics Upgrades: The company opened new distribution centers and consolidated older ones, introducing direct-to-consumer capabilities and centralizing operations in key categories to drive efficiency and support future growth, particularly in fast-growing segments such as dog and cat products.

• Cost and Simplicity Program Progress: Continued execution of the Cost and Simplicity program yielded tangible benefits, including cost savings, improved operational flow, and enhanced employee safety. Management expects these initiatives to position the company for additional margin expansion and organic growth.

Drivers of Future Performance

Central Garden & Pet’s outlook is shaped by ongoing tariff risks, a more value-focused consumer, and the company’s continued investment in digital and operational efficiency.

• Tariff and Inflation Pressures: Management expects recent tariff actions and geopolitical tensions to increase inflationary pressures in the second half of the year, particularly affecting input costs for the Pet segment. Plans are underway to mitigate these through supply chain adjustments, vendor negotiations, and selective pricing actions, though many changes will not impact results until late this year or next.

• Promotional Environment and Consumer Behavior: The company anticipates consumers will become more cautious and value-oriented, prompting a more promotional retail landscape and a potential shift toward private label and value products. Management is focused on maintaining competitiveness and margin discipline as these trends evolve.

• Strategic Investments in E-Commerce and Efficiency: Central Garden & Pet will continue prioritizing investments in e-commerce, technology, and logistics to support organic growth and enhance productivity. The Cost and Simplicity program remains central to operational improvements and potential future margin expansion, even as the company remains watchful for M&A opportunities that align with core categories.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will monitor (1) the pace and effectiveness of tariff mitigation strategies and supply chain adjustments, (2) trends in consumer trade-down to value and private label products, and (3) the ramp-up in e-commerce and logistics capabilities. We will also assess how ongoing weather variability and promotional intensity affect both the Garden and Pet segments.

Central Garden & Pet currently trades at a forward P/E ratio of 16×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it’s free).

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