Snapshot
Central Garden & Pet Co reported $617M of revenue in Q1 2026, up -6.0% year over year, with diluted EPS of $0.11 and an operating margin of 2.7%.
- Revenue
- $617M
- YoY growth
- +-6.0%
- Diluted EPS
- $0.11
- Operating margin
- 2.7%
What management said
- •We closed the quarter with improved gross margins and solid earnings per share, especially when compared to a strong prior-year first quarter that benefited from favorable shipment timing, promotional activity, and weather.
- •At the same time, we're increasingly focused on positioning Central for sustainable long-term growth.
- •With that foundation in place, we're applying the same clarity, focus, and consistency to fostering a growth mindset and embedding innovation more deeply across the organization.
- •Alongside organic growth and innovation, we continue to be thoughtful and selective in how we use M&A to refine our portfolio.
- •After quarter-end, we completed the acquisition of Champion USA, a small tuck-in business serving the livestock industry with EPA-approved feed-through fly control solutions.
- •As we build on the foundation already put in place, innovation will play a progressively larger role in driving growth across the business.
- •Our diversified portfolio, operational flexibility, and a disciplined approach to cost management give us confidence in our ability to deliver profitable growth even as we navigate an evolving global macroeconomic and policy environment.
- •As we look to the rest of the year, we'll continue to balance prudent cost and cash management with targeted investments that support organic growth, especially in innovation, digital capabilities, and e-commerce.
- •We continue to focus on margin-accretive consumable businesses that complement our portfolio and expand our presence in attractive categories, and we expect our activity to increase as market conditions continue to normalize.
- •Based on these factors and our current operating plans, we are reaffirming our expectation for Fiscal 2026 non-GAAP diluted EPS of $2.70 or better.
- •As always, our outlook excludes potential impacts from future acquisitions, divestitures, or restructuring actions, including those related to our cost and simplicity agenda.
- •First, the timing of retailer spring inventory shipments in the garden segment and, to a lesser extent, in the pet segment.
What went well
- •First-quarter non-GAAP gross margin expanded 100 basis points to 30.8%, driven by productivity gains and improved mix.
- •Non-GAAP diluted EPS of $0.21 was consistent with the prior year and above the company's expectations for the quarter, driven largely by favorable product mix.
- •Pet segment non-GAAP operating margin improved to 12.1% from 12%, and consumables overall grew at a low single-digit rate supported by favorable point-of-sale trends.
- •The company completed further network modernization, integrating two garden distribution facilities into modern fulfillment centers and consolidating a fertilizer manufacturing facility into its Greenfield, Missouri location.
- •Central completed the tuck-in acquisition of Champion USA, a livestock fly-control business that complements its professional portfolio, and ended the quarter with $721 million in cash and short-term investments, up $103 million.
- •Garden points of distribution for manufactured products were up 14% year-over-year, and the company gained market share in wild bird, fertilizer, and packet seeds.
What went wrong
- •Net sales declined 6% year-over-year to $617 million, driven by the shift of seasonal garden shipments into Q2 and continued portfolio optimization.
- •Garden segment net sales fell 12% to $202 million and the segment posted a non-GAAP operating loss of $2 million (margin -1.2%) as shipment timing more than offset productivity gains.
- •Pet segment net sales declined 3% to $416 million on portfolio optimization, shipment timing, and a temporary shipment hold with a large pet customer.
- •Pet durables declined north of 20% and remained about 16% of pet sales, with roughly two-thirds of the decline tied to the cushions timing shift and the tank business exit.
Guidance changes
| Metric | Period | Previous | Current | Change |
|---|---|---|---|---|
| Non-GAAP diluted EPS | FY2026 | $2.70 or better | $2.70 or better | Reaffirmed |
| CapEx | FY2026 | — | Approximately $50 million to $60 million | — |
| Incremental gross tariff exposure | FY2026 | Roughly $20 million | Roughly $20 million (concentrated in pet) | Unchanged |
Performance breakdown
| Metric | YoY change | Reason |
|---|---|---|
| Net sales | -6% to $617 million | Shift of seasonal garden shipments into Q2 and continued portfolio optimization |
| Non-GAAP gross margin | +100 bps to 30.8% | Productivity gains and improved mix |
| Non-GAAP operating income | -$4 million to $24 million (margin 3.9% vs 4.3%) | Lower sales volume |
| Non-GAAP net income | -$1 million to $13 million | Lower operating income partially offset by favorable other income |
| Non-GAAP diluted EPS | Flat at $0.21 | Favorable mix and higher-margin offsetting orders |
| Adjusted EBITDA | -$5 million to $50 million | Lower sales |
| Pet segment net sales | -3% to $416 million | Portfolio optimization, shipment timing, and temporary shipment hold |
| Garden segment net sales | -12% to $202 million | Shipment timing, garden distribution transition, and live plants rationalization |
| Garden non-GAAP operating result | Loss of $2 million vs income of $2 million | Shipment timing more than offset productivity gains |
Earnings call themes & trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Shipment timing | FY2025 load-ins concentrated in Q1 | Larger portion shifted into Q2 this year; biggest driver of Q1 decline | Reversing |
| Cost and Simplicity | Project horizon largely complete | Foundational transformation behind; incremental benefits more measured | Maturing |
| Strategic pivot to growth | Cost focus | Pivoting to a growth mindset across innovation, private label, M&A, and digital | Shifting |
| Pet category / live animals | Live animal positive in Q4 | Stabilizing; live animal posted positive growth again in Q1; possible modest H2 growth | Improving |
| Pet durables | ~16% of pet sales, double-digit decline | ~16% of sales, declined north of 20% on cushion timing and tank exit | Declining (intentional) |
| M&A environment | Keeping dry powder | More activity, several discussions, notably more pet activity | Improving |
Q&A summary
How are garden placements shaping up for the season and the opportunity to gain share?
J.D. Walker said Q1 results do not dictate the garden season, total distribution points of manufactured products are up 14% year-over-year, retailers are supporting with promotions and off-shelf activity, and the company expects continued share gains in fertilizers, packet seeds, wild bird, and grass seed.
As cost and simplicity matures, where are you investing to drive growth and are you ready to play more offense?
Niko Lahanas said the project horizon is complete with four modern distribution centers, the discipline is embedded in the culture, and the company is now pivoting to a multi-year growth mindset spanning innovation, private label, M&A, market share, and digital, citing the Champion tuck-in and Feeding Frenzy success.
Can you quantify the impact of the headwinds to sales such as garden shipment timing, the shipment pause, and rationalization?
Brad Smith said timing was more than half of the total net sales decline and the biggest factor, portfolio optimization was second, and together they accounted for nearly 100% of the decline, while the garden product-line wind-down and pet stop-shipment were smaller and fully offset by gains in rawhide, animal health, and wild bird.
Any update on pet adoption and category trends?
John Hanson said everything indicates the category is stabilizing across household penetration, buy rate, and Nielsen-tracked channels, the live animal business posted positive growth in Q4 and again in Q1, the bottom appears to have been hit, and modest growth is possible in the back half.
How did pet durables perform and what is the current mix?
Brad Smith said durables were about 16% of pet sales, consistent with Q4, with a decline north of 20%, about two-thirds of which was the cushions timing shift from Q1 to Q2 plus the tank business exit, and expected year-over-year durables differences to narrow to single digits in the back half.
What is the company's capacity for M&A versus share repurchases, and can you do both?
Brad Smith said the company can absolutely do both, is carrying significant cash earmarked for M&A while waiting for the deal environment to improve, repurchased about $18.5 million in the quarter, and bought back almost 10% of market cap last year, remaining opportunistic when shares are a good value.