Central Garden & Pet Co., Walnut Creek, Calif., reported net income of $5.6 million ($0.10 per diluted share) on net sales of $592.2 million for the first quarter ending Dec. 26, 2020, up from the year-ago loss of $4.4 million ($0.08 per share) and $482.8 million for the quarter ending Dec. 28, 2019.
“We delivered another quarter of strong financial results reflecting solid execution, robust consumer demand in Pet and Garden, and the unwavering dedication of our employees,” said Tim Cofer, Central Garden CEO. “I’m pleased with the continued progress against our Central to Home strategy and remain excited about the road ahead. Recent examples of our strategy in action include three acquisitions, which will build scale in our Garden segment, expand into attractive adjacencies, and advance our omnichannel and digital capabilities.”
Garden segment operating income increased $11.5 million to $4.7 million from an operating loss of $6.9 million in the prior-year quarter. Segment EBITDA of $7.3 million was up from the year-ago negative $4.2 million, primarily driven by volume strength and gross margin improvement coupled with operating leverage. Net sales increased 34.1 percent to $155.8 million, driven by strength across the portfolio, with particularly strong growth in distribution, wild bird feed, grass seed, controls and fertilizers, and live plants.
The company’s cash balance at the end of the quarter increased 36.4 percent to $608.3 million, compared to $445.8 million in the first quarter a year ago. The company used approximately $83 million of its cash to pay for the acquisition of DoMyOwn (GM Jan. 8, p. 1). Cash used by operations during the quarter was $36.1 million, compared to $18 million in the first quarter a year ago. The increase was driven primarily by an increase in inventory due to the seasonal build in preparation for the lawn and garden season and the overall demand for the company’s products.
In addition to the DoMyOwn acquisition, which closed Dec. 18, 2020, the company expects the Green Garden Products purchase (GM Jan. 1, p. 1) to close in the second quarter. The company also reported that on Jan. 8 it closed on a deal to buy Hopewell Nursery Inc., Bridgeton, N.J., a supplier of live plants to the Northeast.
As for fiscal year 2021, the company continues to project EPS to be at or above $1.90, down from 2020’s $2.20. This guidance does not include the impact of its recent acquisitions or additional acquisitions that may close during fiscal 2021. The projected decline reflects additional investments in capacity expansion, brand building, and e-commerce as the company continues to invest in sustainable growth, increasing labor and freight and key commodity costs in addition to resuming more normal levels of promotional activity and travel.
The company also anticipates second-half headwinds, as fiscal 2020 had ideal weather and COVID-19 tailwinds. In addition, the company incurred non-GAAP expenses in the first quarter of fiscal 2021 related to its recent debt refinancing, as well as the loss on the sale of the Pet segment’s Breeder’s Choice business, which impacted EPS by $(0.15) and $(0.04), respectively.