Central Garden and Pet, Walnut Creek, Calif., reported a 17 percent increase in sales for its first quarter ending Dec. 26, 2015, to $359.8 million from the year-ago $307.3 million, and in doing so revealed that it has added the Earth Juice brand to its portfolio and has exited a fertilizer private-label contract.
Central Garden said the quarter includes three full months of Hydro-Organics, Chico, Calif., which it acquired last year. Hydro-Organics is known for its Earth Juice-branded products. Central Garden provided no further details about the transaction. It did, however, confirm more details about two Pet-related 2015 acquisitions, saying it paid $61 million for National Consumer Outdoors Corp., a pet bedding company and $23 million IMS Trading Corp., a rawhide and pet treat distributor.
The company told analysts Feb. 2 that the private-label fertilizer contract was no longer profitable and was not with a core retailer. It said the private label business remains important to the company and it remains bullish on that segment in general, saying “it gives us more critical mass, a bigger share of the shelf,” and drives manufacturing efficiencies, which benefits its branded business as well.
The company also walked away from its seasonal décor business, i.e., artificial Christmas trees, etc. It said it expects little or no impact on its bottom line from the décor or fertilizer changes.
As far as where it stands versus ScottsMiracle-Gro, the company told analysts that in the areas where the two compete, it is confident that has it held or taken market share in all of those areas. Central Garden recently revealed that for fiscal 2015 some 65 percent of its Garden sales came from three big box stores: Walmart at 31 percent, Lowe’s at 18 percent, and Home Depot at 16 percent. Company-wide, the three represented 31 percent: Walmart 16 percent, Lowe’s eight percent, and Home Depot seven percent.
As for the 17 percent first-quarter uptick in sales, most of that increase was from its Pet segment. Sales were up only three percent, to $111.1 million in Garden, due primarily to stronger grass seed sales as well as higher sales of other manufacturers’ products.
Garden reported a seasonal loss of $3.3 million, improved over the year-ago loss of $3.5 million. Garden’s operating margin improved 40 basis points, more than offsetting a decline in segment gross margin. Grass seed, fertilizers, and other manufacturers’ products were the biggest contributors to the operating margin increase, offset somewhat by lower margins on bird seed.
The company reported a loss of $8.6 million ($.0.18 per share) compared to the year-ago loss of $5.7 million ($0.12 per share).