Snapshot
Central Garden & Pet Co reported $678M of revenue in Q4 2025, up 1.3% year over year, with diluted EPS of $-0.16 and an operating margin of -0.9%.
- Revenue
- $678M
- YoY growth
- +1.3%
- Diluted EPS
- $-0.16
- Operating margin
- -0.9%
What management said
- •Our record bottom line performance underscores the strength of our business model, the rigor of our execution, and the relentless commitment of Team Central.
- •Second, we continue to strengthen our foundation by streamlining operations, consolidating facilities, optimizing our portfolio, and driving efficiencies that enhance our cost structure and position us for sustained profitable growth.
- •At the same time, we continue to deliberately reduce our exposure to low-margin, durable products in both pet and garden.
- •A strategic move that, while creating short-term top-line pressure, strengthens our portfolio and positions us for sustainable, profitable growth.
- •We ended the year with record results, a fortress balance sheet, and strong momentum as we head into fiscal 2026.
- •Our initiatives continue to deliver measurable, sustainable benefits, enhancing productivity, expanding margins, and positioning us to fuel future growth.
- •Our diversified portfolio, operational agility, and prudent cost management give us confidence in our ability to deliver profitable growth despite current global macro environment and policy shifts.
- •After incorporating these factors and our operating plans, we expect fiscal 2026 non-GAAP earnings per share to be $2.70 or better, supported by margin expansion and operational performance.
- •As always, our outlook excludes potential impacts from acquisitions, divestitures, or restructuring actions, including activities related to our ongoing cost and simplicity agenda.
- •We're combining the agility of a startup with the strength and scale of a category leader, empowering business units to innovate quickly while leveraging Central's operational and financial capabilities to accelerate growth.
- •Looking ahead, we'll continue to balance sensible cost and cash management with targeted investments that fuel organic growth, particularly in innovation, e-commerce, and digital technology.
- •We're actively pursuing margin-accretive consumable businesses that complement our portfolio and expand our presence in attractive categories.
What went well
- •Central closed fiscal 2025 with record full-year GAAP EPS of $2.55 (up $0.93) and record non-GAAP EPS of $2.73 (up $0.60), exceeding both guidance and the prior year.
- •Full-year non-GAAP gross margin expanded 210 basis points to 32.1% and non-GAAP operating income rose to $265 million from $223 million, with operating margin expanding to 8.5% from 7%.
- •Full-year adjusted EBITDA reached a record $371 million, up from $334 million, and non-GAAP net income rose 22% to $174 million.
- •Fourth-quarter net sales grew 1% to $678 million led by garden strength, with garden segment sales up 7% on an extended selling season and favorable Q4 weather.
- •The company largely completed its multi-year supply chain network design project, closing 16 legacy facilities and establishing modern DTC-enabled fulfillment centers in Salt Lake City, Eastern Pennsylvania, and Covington, Georgia.
- •Pet consumables reached an all-time high of roughly 84% of pet segment sales, and the company was named Lowe's Lawn & Garden Vendor Partner of the Year.
What went wrong
- •Full-year net sales declined 2% to $3.1 billion, driven by deliberate exits of lower-margin durables and U.K. operations plus the transition of two garden distribution product lines to direct-to-retail.
- •Fourth-quarter pet segment sales fell 2% to $428 million with pet operating margin contracting to 7.2% from 8% on lower volume and investment timing.
- •The company recorded a non-GAAP operating loss of $649,000 in the seasonally weak fourth quarter and a non-GAAP loss per share of $0.09.
- •Pet durables remained roughly 16% of pet sales and continued to decline double-digits in Q4, and full-year SG&A as a percentage of sales rose to 23.6% from 23% on lower volume.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Non-GAAP EPS | FY2026 | — | $2.70 or better | Initiated |
| Gross tariffs | Q4 FY2025 | — | Roughly $7 million to $8 million | — |
| Pricing | FY2026 | — | About 1% to offset tariffs and commodity exposure | — |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Full-year net sales | -2% to $3.1 billion | Deliberate exits of lower-margin durables and U.K. operations plus garden distribution transition to direct-to-retail |
| Full-year non-GAAP gross margin | +210 bps to 32.1% | Productivity initiatives across both segments |
| Full-year non-GAAP operating income | +$42 million to $265 million | Structural cost improvements and strong execution |
| Full-year non-GAAP net income | +22% to $174 million | Margin expansion and lower interest and other expense |
| Full-year non-GAAP EPS | +$0.60 to $2.73 | Record profitability exceeding guidance |
| Full-year adjusted EBITDA | +$37 million to $371 million | Operational execution |
| Q4 net sales | +1% to $678 million | Strength in garden from extended selling season |
| Q4 garden net sales | +7% to $250 million | Favorable Q4 weather, additional product placements, and strong retail execution |
| Q4 pet net sales | -2% to $428 million | U.K. closure and lower durable sales, partially offset by animal health growth |
| Q4 non-GAAP gross margin | +310 bps to 29.1% | Lapping prior-year grass seed inventory charge; productivity offset initial tariff impact |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Cost and Simplicity / network design | Ongoing consolidation | Multi-year supply chain project largely complete; 16 legacy facilities closed | Maturing |
| Margin expansion outlook | Dramatic recent gains | More modest expansion expected in FY2026 as low-hanging fruit is picked | Decelerating |
| Pet durables | Declining double-digits | Still ~16% of pet sales, double-digit Q4 decline, much from proactive SKU exits | Declining (intentional) |
| Pet ownership / live animals | Stabilizing | Stable to up slightly; live animal business posted ~1% gain in Q4 | Improving |
| Tariffs | Roughly $10 million FY2025 (bulk Q4) | Gross Q4 tariffs ~$7-$8 million; mitigation actions beginning to flow through | Managed |
| M&A pipeline | Muted, cautiously optimistic | Keeping dry powder, actively hunting margin-accretive pet consumables | Improving |
Q&A summary
How do the operating margin puts and takes net out for fiscal 2026 between cost and simplicity, tariffs, and demand?
Niko Lahanas said the company intends to continue expanding margin into 2026 but expects less dramatic results because the low-hanging fruit has been picked, and cautioned not to underestimate the effect of product mix.
How are you feeling about the garden category and spring 2026 sell-in?
J.D. Walker said the company is cautiously optimistic, citing year-over-year points-of-distribution gains of 8% excluding pottery and double-digit gains in manufactured products, with the season still dependent on weather.
What drove the roughly $11 million increase in fourth-quarter corporate expense, and what were Q4 tariffs?
Brad Smith attributed the corporate increase to quarterly timing variation, investments supporting 2026 commercial growth, and miscellaneous reserve true-ups, with nothing structural, and said gross tariffs were roughly $7 million to $8 million in Q4.
Have retail customers accepted your tariff-related pricing, and how are you thinking about elasticity?
Brad Smith said negotiations are more than half complete, almost exclusively on the pet side and garden, and expected to conclude into Q1 or early Q2; John Hanson said prices have not yet risen in the market but modeling suggests roughly one elasticity, and pricing is used as a last resort.
How did durables perform in Q4 and what is the current mix?
John Hanson confirmed durables are about 16% of pet sales with a double-digit Q4 decline, a big piece driven by proactive discontinuation of low- and no-margin SKUs completed in the first half, which the company will lap through the first half of next year.
How should we read the small Q4 buyback and record cash balance regarding M&A versus capital return?
Brad Smith said the company is keeping dry powder and actively hunting margin-accretive pet consumables while remaining opportunistic on the stock, having bought back about $18 million in the quarter and over $150 million during the prior year.