Central Garden & Pet Co., Walnut Creek, Calif., reported net income attributable to the company of $1.8 million ($0.03 per share) for the first quarter ending Dec. 29, 2018, compared to the year-ago income of $26.2 million ($0.52 per share). The company said the decrease was due in large part to a tax benefit it received in the year-ago first quarter related to a revaluation of the company’s deferred tax accounts.
First-quarter net revenues were up 4.5 percent, to $462 million from the year-ago $442 million, driven by two recent acquisitions, Bell Nursery and General Pet.
The Garden segment had a first-quarter operating loss of $4.6 million, versus a year-ago gain of $2.3 million. The decrease was attributable to the Bell acquisition, as that company has extreme seasonality. Other factors weighing on earnings were lower organic volumes and higher costs for raw materials, freight, and labor. The company said higher costs should be mitigated later in the year due to price increases that took place at the beginning of the calendar year. Garden EBITDA was a negative $1.8 million, down from the year-ago positive $3.9 million.
First-quarter Garden net sales rose 4 percent, to $121.6 million due to the Bell acquisition. Organic growth dropped 4.6 percent, impacted by a timing shift at a large customer that placed significant seasonal load-in orders in January versus a year-ago in December. However, the company noted that consumption at the company’s largest customers rose substantially (9 percent), and has continued to be strong through January. Garden’s branded product sales, including Bell’s, were up 6.3 percent, to $92.5 million. Sales of other manufacturers’ products were down 2.8 percent, to $29.1 million.
In the Garden segment, the company said it is deploying new technology in some of its private label fertilizer and control products. In addition, it is launching Pennington Lawn Booster, a new combination of grass seed, fertilizer, and soil amendments. It is also using a new technology in its Pennington Smart Blend grass seed products.
The company forecast fiscal 2019 guidance of $1.80 per fully-diluted share or greater. The guidance excludes the Feb. 2 acquisition of the remaining 55 percent stake in Arden Companies, a maker of outdoor cushions and pillows.
Central Garden expects Bell’s seasonality to continue to be a drag on results in the second quarter, as that unit traditionally only shows a profit in the third quarter. The company also notes that second-quarter 2018 had organic growth of 6 percent, making it a difficult comparison for second-quarter 2019. Second-half 2019 is expected to benefit from an alleviation of inflationary pressures, price increases, a more favorable mix of sales, and the positive impact of cost-savings initiatives.