CENT - Earnings call transcript Q3 2024 | Central Garden & Pet Company

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Central Garden & Pet's Fiscal 2024 Third Quarter Earnings Call. My name is Robert, and I will be your conference operator for today. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to your host, Friederike Edelmann, Vice President, Investor Relations. ahead. go Please

Friederike Edelmann

Chief Thank XXXX everyone. today Q&A. John joining Third Niko Central's Pet Beth Garden remarks, Walker, our Good Products; about for Consumer In Call. you join With Fiscal Lahanas, Officer; Executive Earnings Interim call results. the Officer; prepared me Quarter J.D. Consumer and and Springer, President, a afternoon, Chief for Financial on are highlight John will us details Beth Hanson, provide messages, key more President, J.D. will our and Products. moment, Niko will After the

call Comments made during are forward-looking this uncertainties. include and to subject risks that statements

Our of report XX-K and actual shared range risks we in publicly what undertake no our on Form obligation including differ these results annual materially to forward-looking SEC statements. from our the today. We've update described filings, may in

including the related available call reconciliation Our otherwise. against are All materials, the release ir.central.com. prior the this at the press on measures are unless year, non-GAAP same in GAAP indicated period made discussed comparisons and for growth

you the don't out to reach call, me. further after If hesitate to please questions have

And turn I will to over Springer. that, it Beth? with Beth now

Mary Springer

Friederike, everyone. Thank good and you, afternoon,

from we with key begin X take like call. messages the to you away Let's this would

$X.XX the products sales impacted earnings in softness more non-GAAP recognizing categories. XXXX negatively delivered e-commerce was plants solid environment. EPS pet quarter earnings challenging weather in third was live our Unfavorable garden and our performance had First, and growth than we double-digit of and record EPS across durable GAAP quarter third $X.XX. the XXXX. We of pet in offset continuing a

we Second, expanded further margin. gross

year decision our include the and to closing a business our cost fruit. plants exit business next underperforming continues live of simplify organization pottery our the and fiscal facility. the bear simplicity over to improve distribution efficiency and Recent strategy across milestones to Our

maintaining we the our fiscal outlook third, for are And year.

of approximately we grass million $XX $XX inventory recent in write-down anticipate market million seed prices quarter. our now decrease a in Given fourth for grass to significant seed, the the in

a noting uncertainty our see retailer value-seeking also to worth we delivering weather, the inventory volatile consumer. face and it outlook, is about path we While that continued

we term, our simplicity make Central continue program and to to remain improve to and garden our in industries to the and pet the generate and the Longer cost strategy. enable believe in will attractive, thoughtful trends us consumer Home profitability investments fuel

will more want me that, dedication to and I with of details. Central all And this over their Finally, thank hand members hard let X,XXX Niko? you Team share quarter. with Niko, who it for to work

Nicholas Lahanas

Beth. our more on QX Thank for everyone. afternoon, provide simplicity you, Good I'll details outlook program and progress cost and year. our results, the on our the

X%. were Now sales with sales declined let's our or Organic million third Net $XXX quarter also year. net prior below start X% results.

prior of essentially cushion cost profit projects, $XXX by Non-GAAP inflation. moderating benefit the gross our with with and in of including Non-GAAP million and simplicity gross line to year. from margin improved year's was beds consolidation driven last dog business the XX.X%,

of percentage was corporate, of non-GAAP due due a basis primarily to to legal mainly $XXX by points X% million TDBBS XX.X%, year, above the prior SG&A sales higher and net Non-GAAP and SG&A the as in expense acquisition increased costs. increased expense XXX to

million operating Non-GAAP higher driven $XX was margin to XX quarter, compared year by expense the operating $XXX from and million income balances cash higher higher interest million was non-GAAP in rates. XX.X%. points interest interest income $XX Net contracted basis prior and by to

was $X.XX. ago. $XXX EBITDA dividend. the million prior million $XX EPS $XX EPS a GAAP $XXX Note Adjusted stock $X.XX Non-GAAP of of compared adjusted net to to million the income year year compared $X.XX EPS compared non-GAAP delivered to to February $X.XX was We was for and million. that XXXX compared

in XX.X% the Our larger effective to the tax year benefit quarter in to prior XX%, due compensation current to tax quarter. stock a year rate related was compared

primarily excluding with sales, across acquisition, in sales pet and ongoing to segments, continuing pet new some dog net X on professional Pet. with Pet our and the segment recent TDBBS our details increased equine. add products TDBBS, due Organic decreased declines durable million, business, X% me cat spending. adoptions consumer X%, impacting Let beginning driven line categories, to in by $XXX and pressures, macroeconomic softer our discretionary

outperformed Importantly, POS shipments. our

brands, market once aquatics and our in again private flea-and-tick outperformed share small strength bird. and Branded products, our wild pet expanded the label demonstrating products of animal, we

Let innovation. just our marketing me highlight a few recent product and of

care. BlueIQ a with first the for line, filter app, light when aquarium Aqueon, too time Coralife app fish their freshwater WiFi the replacement. will keepers aquatics or can smart it's salt water control lights easy smart Bluetooth-enabled our notified and and a be for and introduced and Using aquarium on long is Our France now lights, LED

new Kay, ARDEN's patio featuring outdoor fiber textiles blend collection Music the bamboo, and launched Alexandra viscose Our a cushion eco-friendly, first brand, Country polyester. are ARDEN, of Singer-Songwriter its together material, earth fade-resistant with favorites

campaign, over the brand, achieving music Equine million our featuring everything XX its with live And Trio, impressions, Farnam, engagement well conversion rates The driving country ride benchmarks the Castellows, innovative and rates. above went for strong resulting in

and XX% sales. Our pet representing business outpaced market, high e-commerce of the approximately growing digits single our

million operating in conversion gross $XX compared by to to we basis XXX segment our margin expansion. segment ago. driving key income Leveraging XX.X%, a adjusted XX% margin operating categories. improved was $XX capabilities, Pet share several driven rates, expanded million, online Pet $XX and points EBITDA improved year growth by million to pet online

Longer through trends, including health and buy pressure and will We expect growth. this will pet expect penetration be consumable fairly industry pet rates growing that and consumer a of and to pet fiscal term, younger support premiumization and We share products year. grow sustained we stable. to humanization, durables continue shift wellness generations e-commerce to but household anticipate on

the million offsetting to seed. Non-GAAP our year. compared margin sales of to garden we plants, the year Recall was declined garden the in our sales the X%. to April segment now year, in prior compared to This segment grass almost net sales plants, categories, income of or heat a represented were cold distribution $XXX $XX sales. below due live Garden than that Switching in year impacted independent growth businesses. $XX of weather $XX in million segment Garden in wet business negatively lower particularly the May, and key X% all Garden sales was June, ago. XX.X% Garden. sales million segment fiscal last and by sell-through Organic million record more live followed year. across channel declined operating approximately Non-GAAP operating X% $XX to sold garden EBITDA prior our adjusted one Garden million,

in garden and year essentially buy category. and penetration have above demonstrating are with the Household XXXX line rate in remained the consumers well staying engaged prior levels,

boomers While is that comprise of shift category XX% beginning to younger to the growth. historically cohorts, future spend, supporting

prior baseline. in center However, the customers was below our year pre-COVID and largest home foot traffic

Our Garden targeted drove particularly total of in retailers share investments resulting categories gains digital return and double-digit capabilities in and growth, X% across branding ad growth and consumer spend e-commerce supported now insights, and sales our sales. increased conversion, represent online. on We e-commerce and

the flows. to sheet Turning cash now and balance

was million the stayed ago. were balance particular, decreasing added compared the Our cash $XXX garden million $XX inventory Net $XXX lower team in TDBBS. quarter on to inventories million, by year operations despite remains our now and focused for strong, provided side, the equivalents from million on Cash sheet compared quarter with a total million. and at cash $XXX the end $XXX of third to the inventories,

billion and maintenance dog productivity cat business, This in grass quarter, initiatives in in was animal, the mostly we our of bird. with the invested $X.X $XX prior and million and line wild of debt CapEx, small year. Total

to leverage our ago. had of credit ratio was to the facility gross borrowings under quarter. was million. $XX million and at $XX for the the end compared the Our at the quarter, a Xx third no Depreciation X.Xx year quarter amortization We of end compared

increases. our continue administrative reduce create procurement, cost make to are cost sustained optimization progress us generated allowing invest costs and to and savings on and simplify We The logistics, business. projects offset across the from our portfolio to strategic to manufacturing, capacity journey

optimization, closed our called Fish of the facility remaining ongoing and organic manufacturing part network Alaska facility moved Missouri. California our As fertilizer manufacturing the garden we production our of in in to

center science work reduce developing processes we our new rightsizing and third-party country We a innovative distribution testing consolidate and research our new a breeding and grass strategy, current controls line in on footprint opening center. will seed on the In facilities seed grass reliance location across focus as farms our fulfillment Oregon. farms live products. well simplifying plant and which logistics with Texas, research goods next-gen Our and the of recently operates closed announced our as with in the

we and and Alabama new new Garden facility. of well Georgia locations a X underway, out recently is distribution Georgia, of fulfillment consolidation started The based Virginia, the center into shipping across

region. to center our portfolio in-season the including We in out across winding new X support inventory, down expect the future on-time business, started remaining shifting locations and was growth taking Southeast pottery improve Optimizing service we to businesses, underperforming held the which the higher-margin our and in country.

simplicity including of in an largely of SG&A, incurred $X.X which costs of the we in sold pottery a $X.X the related goods result cost noncash. of was As and million our projects, onetime million in exit, cost million quarter, $XX to the majority and

on will Our and have multiyear our we and rallied X,XXX quarterly behind provide of our cost updates Central Team progress. program, members simplicity to continue

and deploy across The our of strong. to remain pipeline scale our capabilities leverage our segments projects X

past, of the reduce in plenty ahead there of be opportunity we us. As to cost believe will

fiscal not turning And least, last but to outlook. 'XX our

million Due recent for significant of our based for write-down our We the $X we are fourth in fiscal outlook EPS approximately of on our maintaining seed $XX grass despite million current market a inventory challenges. year $XX decrease to anticipate to of a non-GAAP better grass or quarter. seed, in several analysis, the in prices

in including focused a volatile confident risks retailer meet must to around ongoing our inventory and and the levels fiscal base we that on uncertainties, increasingly uncertainty are value. is we weather, acknowledge consumer While goals, our ability continued

Additionally, and foot we an environment of key assume moderating in consumption and inflation, customers in number center a categories, lower volatility. of home geopolitical macro traffic softer

Central, competitive believe and of ahead, we Home positive our growth the in Looking industries. strength X in consumer to to long-term continue strategy enabling Central our trends, the

our Garden we coupled enable for capabilities, Thanks enter growth example, to for accretive credit our remain digital margin to to businesses adjacent can and e-commerce. us on and Pet add in our available in the lookout categories financial the targets acquisition position, scale ad or and amount on facility, that with

impact including cost excludes quarter, outlook the of our program. undertaken any the during activities the always, restructuring any under simplicity projects fourth As and

with back final for to comment. a Beth? that, let Beth turn And me it

Mary Springer

Thank to update like you, Niko. on provide an CEO would I succession.

been Board know, of you Officer. Executive identify working our Chief Directors has next to As our

calls on we shared been of work. pleased our we've with now stages have in that and final are prior We the our progress,

as be before could as which soon, the our announcement earnings of an QX early make to year fiscal current certainly end and expect We our release.

to like now questions. for We'd open the line

Operator

Markets. [Operator question Brad Instructions] comes first Our KeyBanc from with Capital Thomas

Bradley Thomas

could. A couple of if I questions,

and to know segment. in off the I I the coming with off quarter First, wanted most Garden important start of segment, for the the year we're

a versus just so trends about as just less about And pricing? weather guess talk impact I to you next the look we underlying last the the little of was bit on reflect versus health little thinking And how months, of impact important year? the category going of seasonally. as overall you're out hoping more I But forward, could the few a we the

J. Walker

question. it's Brad, for J.D. take the that. I'll Thanks

had the for Niko the in of year. consumption XX% it of X the for the including goods encouraged all, script. most first us. front the a still live we a had months quarter pretty of first year, was quarter, which business of months X his season of We challenging a quarter, First our referenced was into the The bit up decent of heading in were in

really a As place. you most quarter. profoundly true. by takes But that's businesses, we all QX, of when largely unfavorable that's our weather is on then of the dependent there. our impacted in most across business know, live That's goods were consumption third that And business

of heat intense and cold and weather April first think the May wet part month the Niko of June. then it followed said and through well, by in I

that of the of just months X And is QX, just May, business for up goods So XX%. and something which X%, down XX% year, month when most taking of month that's that for from. down peak consumption that's the first The couldn't recover the takes live alone, we the place.

the goods scrap rates. high sell you don't you have If there,

solid, the I goods the been And goods rest live really, and at strong, would quite been for separate the the business the underlying rest have if ex business, should Consumption business, have would the were healthy. live wasn't from we of bad say. our -- metrics of financials all,

So businesses. business one really that's year-over-year, a it's weather predict. doesn't it was -- hard look And great, our to the that is by seasonal but comparison of driven

long-term it's to do. say I'd conclusions to challenge a draw So that that, from that's

of We're referenced optimizing more our share we of optimizing share I including cohorts good and that making e-commerce to fundamentals are nicely. great categories, insecticides, progress of our the and we're grass the think in lot are We're now, gaining that right couple a about efficiencies. there. number on underlying There's some our entering cost a gained We've working still stabilizing, and about. Household penetration is footprint, future. categories. younger simplicity feel in encouraged is growing Niko that. facilities different A initiatives. outdoor

the feel your answer to So dynamics question, of we business. about the overall good

lawn entire that one and for business underperformed that business. garden have the We quarter, our and affected clearly

Bradley Thomas

opportunity could X takes on current more as talk bit strokes? And forward you Could little knowing you? fiscal yet, you year in haven't in Central environment. has broad to bit left, have margin quarter J.D. look formal helpful, opportunity puts what the good you so just a job very of XXXX, and Niko, we about as very a things maybe think guidance hoping that little reflect about you with given what we broad done difficult a I again, about maybe supporting but a looking ahead talk of was strokes, in That's the margins out you this

Nicholas Lahanas

to Yes. Sure, going It's of really. more Brad. the be same

pottery initiatives business a that on plan see. underperforming initiatives that and last was our optimization have beyond. There's well we us. from a of we announced nice both of got as the margin well wind standpoint. ahead We pipeline line you're the This simplicity as 'XX and business. executing also portfolio into going of a We've to That quarter, top cost down

well cost be to projects of as in out at we going to the we're looking as can continue So that ruthless terms pretty portfolio do.

to said, margins goods Garden would at tough that contracted would just business to just and pile expanded on fact, just J.D. in underperformed. to business I to basis And company. what company that devastating points, by overcome. really the look even too say was somewhat the have total live which and X,XXX It, garden both had you is

on becoming margin But continuing yes, back cost we have focusing simple, getting journey every your of businesses. taking more to intention out, this in question, on higher

obviously November putting be our kind think company. when of it's push So I more of to It's in lot our guide a the together. say the just more more going out of we a middle big late same. color We'll plans the lay But I in same. for give those would we're of and for the 'XX,

J. Walker

in lot simplicity in us. and say still innings Niko, early still still the I'd runway of initiative, that the And right? And we're cost have a of front we of

Nicholas Lahanas

do some Plus We of we to into the really warehouses, we out do. And X We We a took can had opens out back that consolidated areas, big that, to warehouse And really it that. in where in other ancillary it space Covington, close domino getting did like effect warehouses you do. project that able leverage. then example other down. sort when there. has a that too, we're we surge up

of really a So of a optimizing more have integrating runway growing to think And through of you come in a businesses. where one lot of acquisition longer bit there. terms benefits little the it's and I

Operator

Truist Our next Securities. Bill Chappell from question with comes

William Chappell

in do heavy have you specifically, up think -- gained some Just and what's a grass through more, of there us I glut XXX because I but following And share, I a Scott's parse their that they're exactly guess, of that maybe -- seed. can on say write-off quarter. through in on was on to fourth points they going Garden and help basis grass discounting going the market talked lawns, seed about call you

you're the your looks so seed getting terrible. understand, to largest like excluding I'm trying live least everything to grass competitor, But it you and goods, business fine. at And according said was trans just -- seems

clarification there be any would helpful. So

J. Walker

they seed, But categories And -- that share believe think strong seed. called Grass too their there. out that out I they a is in a Bill. I'd few grass competition strength is don't say strength we about speak Trans called much. the call term, performed lawns, to that in which has not us. I grass believe We they took know that different particular well we any seed in for

me supply from of wild dynamics, explain years. let the We've to fluctuations demand some And But happened few kind I'll little last about a few some market speak bit XXXX over the over in of and last to the seen XXXX. years. what's

was beginning at harvest, inflation we of pretty a there rapid supply consequently, a into the drought demand unprecedented that. going on the a as all, of then so the and impact was of pandemic the had seed period, low for during that significant saw First grass that cost pandemic, result

And Bermuda, some KXX, all tall Fescue, significant saw of those our varieties like Perennial turf-type Ryegrass, increases. of

doubled of standards cost cost post-pandemic costs the then planting acreage higher what forced the so, we've And unprecedented. really consumers farmers think is unusual, the Some seed. And to more higher is to or last have years historical otherwise. those X.X led period, grass versus really seen which and in retail in the start over for

demand situation. the and that's unit So exacerbated We've seen we've seen declines, soften.

we all in, see record we coming but not heavy in everywhere, coming it's is a domestic a we're chain across of, as just aware ago prices crop. retailers, issue, coming year's harvest that Supply a this solid As international well. just manufacturer paid. harvest every we're barns, that in off year's not it's our and This year with

month is and new that's this reacting significant heavy I'm So so, news about we're dropped in prices Therefore, we're here. what have inventories And drop, seen to last the we've really or talking seeing price significantly.

Nicholas Lahanas

of at to and reason take that's inventory, look have value that the the behind force realizable And the write-down. net really driving a the we

William Chappell

to you're burn have choosing out go I Or pet, it to on but of grass does And up another just some like take question seed clarify, supply just bad? the the market? to

J. Walker

grass market bad seed. on grass too doing What market, we're of right? dropped. here germination The to if is That's long, marking here. case can drop Our it go time so over the rate will sits seed much not has the

we of inventory. have lower our cost therefore, to So the

William Chappell

like it. I light how in kind terms consumable see year? trying versus performed it. of end both pet, category just of And durable Got And then Got the on the we as understand kind at to tunnel from historically. expectations your of side, of this understand. into a of you to whether it's kind category the returning been the the move 'XX as growth and

John Hanson

that. as is would Bill, the softer we planned I what on year. John. been This can we have say a had drillable bit comment I than entered

to in keep decline, is I mid-single growing and durables that XX% our I and low digits. Now double XX% mind business And is think, consumables continue durables. of think we're consumables, digits

Niko it we're durable through low we short close got just see But mid-single stay term, We're an to via know ownership, measure but term, So been. softening terms low-priced that in it impact, staying environment. we've can't channel. categories to headwind, data, also of this imports have we macroeconomic talked the growing we it's digits, Long really pet right? for really syndicated as good having way about to seeing in e-com our it. work don't coming we to close and We these And sure.

Nicholas Lahanas

on right remained category the cat John rates more And Yes. And because are down, the somewhat I has you're spot what down particularly top stable. a again, softening, also is penetration we're seeing little said seeing, adoption of that's dog, that in and think on.

coming share, Asia some of low-cost some online but taking Amazon, Asian in really some both have via competitors. the other seen from We competitors also and

have work to or competitors to do the actually some we there. category, And out and share category is just the But losing what figure to that's still of some the category up the doing so Asian is down. to

you're obviously to be. And consumables. see skewed the need a that's portfolio I where more think we towards to is what in I future that's think going

John Hanson

We're share. Yes. to healthy. pet very as bit into that XX% managing pet through that, is business, of to And continue our channel. a It's fastest-growing our lean And just said, going as We soft. That on e-com well. We're to channel. gained add specialty that Niko the now. business remains is

Operator

with Our comes Jim Hardt. Crespi & Monness, next question from Chartier

James Chartier

we quarter, you fourth margin Excluding talk the write-down maybe the of consider? in should just about some can dynamics that other

Nicholas Lahanas

I just from I'll Yes. beginning. the mean, start

non-GAAP at we through look ago, you a basis we're If on QX, were This year, year-to-date year $X.XX. at at a $X.

We So It together net it. we gets We with feel feel this that deal back put up realizable have grass X and solid the really business. great seed, to to we've had quarters. we with come the about value of inventory. like

right do in had to We goods. have that, what the add challenging J.D. mentioned, had I we very, thing. would year very to a live

businesses have are those X out a So are of we there bit drag. little sort of that a that

Overall, QX, sales though, Garden I reflect back were actually digits. up on if our double

seed me, excuse or our up sales -- So were grass double digits.

So And pretty One a then we in are those and inflation. in expand, the moderating some simplicity nice And then expansion. also to really things to really margins forces. good due X margin X business, contributing program and the is grass across QX. cost still to actually had our continue quarter

James Chartier

talked coming of I drive into you the next do are about of And you to feel kind about to spend? business? the thinking kind you about then how innovation what then advertising and some are And marketing. you doing pipeline year? guess new innovations market how some coming And Okay.

Nicholas Lahanas

and I'll John, mean, J.D. think I enough I great I'll you innovation it can over to comments, give have and ideas. and overarching never kick some

great the area on are, So like we pleased for where with can can We're an we but lot where better. and to really pretty that consumer to new a great that's retailer. do for feel ideas It's fresh improve bring the the like improve we an market. to we effort and there we is feel

company, ideas. partners, well organically, DNA fresh top And that, but M&A as of on come we new through do only bringing those to I by want the thought they're going into not come think new to

And want are go want to right areas we we have really we a to after. to the where after areas those go win. So then that

consumables pet side. So as mentioned we to the in want we be earlier, really on

pottery. side, On consumables, be garden in divesting the we we're want also to

I think And progress. to details. get can We've I but some go, think give we got I'll So long any it and kick J.D. made really ways we've nice a John over better. to to

John Hanson

Yes.

in the on nail Niko Just the pet, really hit right? to on head, consumables. is focus jump pet Our

We continue our to innovation build and improved, you I our insights. can it and good head have And certainly but capability and about feel as we never enough, we pipeline think hasn't 'XX. into fiscal

side, digital. improved. marketing I pivoted continue the we've investment to the built shares market we've behind is On really that that to in do showing capability And think it e-com, that, on the see and behind we'll that. And up really our you

J. Walker

and And feel the It's made listings we have review customers, good similar over on the line innovation from feel -- the about side now Jim. progress our about story good nicely. with landing we years. well, last We've then our finalizing couple garden several XXXX We a the are. months, as go. right pipeline. We're nice in to of Yes. process still results The the building we of past ways where

nice I for year. our think branded we'll see next portfolio in growth

now, year. for store distribution too don't combinations, want SKU I but next to of points my many that we'll think grow cards do I show see right total

a lower on of that is to I type appropriate Similar And to our funnel tactics. that. this I innovation type that encouraged marketing think So pipeline. conversion building business that's type environment John, value. we're focused by And speaks more seeking tactics will a consumer where the to be think

Operator

Bob Our is with next Labick CJS question Securities. from

Unknown Analyst

Maybe you a revenue some for This is to add necessary can for forward? return to Garden Will for going the on Bob. color components

J. Walker

question? me a on Will, can little more you that give color

Unknown Analyst

about necessary I pipeline? for And components -- return can maybe going more talk then for you to a about you forward? Did garden talking revenue you about... innovation the can you're the talk know

J. Walker

You mean growth?

Unknown Analyst

Yes, growth.

J. Walker

largely it was think I what just speaks I to addressing.

new distribution, we which that review right results. line are now, Some of working is on finalizing

I distribution. gains think we'll see in nice

It's on. would tough nice. business, a Of plan course, in be seasonal to weather

we activities, about of think on What mother about weather -- things in good Will, factors, we retail. those And business the things. think the need then that next things about funnel standpoint. year, this feel profile lower back if So about standpoint. investment very execution we like causal also all We good feel is from nature participation like controllable we from a marketing I at revenue and getting our get distribution, some

Nicholas Lahanas

year brings actually and as wet, out both extremely packaging I cooperated, weather some controls this We add that our online with go, actually successful, the in to business J.D.'s the hot And has would in it's new far came other as the and bugs brick-and-mortar. controls all was thing point then which out.

for And had ways, so many weather very we've driven control as in bugs. And packaging far. well a largely, very good so year the nice by as

Operator

question next Canaccord Brian from Our comes with McNamara Genuity.

Brian McNamara

clarity on Most answered, of our questions more the pet little durables. have already been but I'd a like

sequentially. still double of quarter, they digits last but think improved were kind you I said

I grind -- think Is it's long that that digits a said improvement. It just here. this I'm low double further been down time. assuming were you seems a they like that's

John Hanson

you're with long, right. that. Yes. It has been would a I agree

imports As products But in really coming quarter, last one our long the quantify I'd last in macroeconomic e-com. from gotten call of over softening ownership, stay category really relative Niko That has the business. it's from pet via close we're on Asia coming probably an the been to headwinds still a wouldn't I manage it really category yes, a quarter-to-quarter. sure. here going for appropriately. to And we're improvement soft. radar it burn and and in quarter-to-quarter. this The from just kind it, trying said, from call impact to our to remains stabilization it

Nicholas Lahanas

for there's bit is the going more important brand with also a there's commoditization to going and less a They on And bottom. commoditization a of part, lot race on become of durables. the and most little

we're more on is which, where consumables, not consumers. again, build and we're brand it's can with we probably connect focus why eager in, and participate going So that to to customers something our really

John Hanson

of durable have we to to said And commoditized -- categories private just build that and is lot are like durable before, bit. XX-XX being label. are I -- or are Categories heavily Niko a on Yes. been a Yes. consumable that, right,

Brian McNamara

Like kind from a actually reliable that supportive, pet And ownership seeing weakening about then maybe July A -- mean, of all feels old companies in consumer standpoint? Great. just we into maybe to seeing companies a secondly, the you then curious saying of right. All humanization you're that kind talking heard there. we've stuff of there. what has mean struggles I'm lot throw of the are I like that's really consumer whole the it And we're trends month. relative of weak a weakening. trend those host but have cyclical structural I kind been

think we about environment? a maybe should how potential that weakening So macro

Nicholas Lahanas

I consumer. business. mean The categories, many We are of value-seeking good news I we say our Yes. behavior in we see have seeing our the best. that better, good, in that would is, by

just product see more premium the the So will we consumer that in we to good buying have the as category. opposed

which So great. we covered are there, off is somewhat

the very the is are for People bigger. would Costco, why value. well value side, real pet sizes there play. On our That's is there. largest We pack big customer which do a submit go I

ongoing and behavior, to the I of recognize we but sort that think sweet that, need also an so trend. get And we in hit that's spot value-seeking better many ways, of

boomers overall, on are the would the I really is side what of a we're say, pet kind seeing wildcard.

been pets biggest area think not weakness. re-upping You're their pets. that's new as with they're away, pass And the of of I seeing probably some they

hobbies Z cohort Gen side, side, and into garden younger a come millennials category as positive these get as on categories. we're the and seeing really seeing we're the the well On into

So for bodes that the future. well

more into rough sort going patch, get trajectory. more think normalized should of I were soon, of sort a a we out back type through growth can little bit itself a and we of it and

Operator

Our with Shovana JPMorgan. next Chowdhury question is from

Shovana Chowdhury

couple a have of questions. I

cash million like sheet, also us On of looking the mentioned I give with And terms the can seeing you digital market the your and details in M&A into of you're -- balance M&A? e-commerce. $XXX think in what about you you're on on more

please little could If add you a more color? bit

Nicholas Lahanas

looking amount of good to cash. fact then quicker of the more very We importantly, it right get cash got we've we're garden feel we're we -- We the we've and to into close Garden pet more Yes, much Sure. again, pet now the in to is lean consumables. back very us makes and And that X My that in like acquisitions a because pet our given did categories. XXXX bias proud speed buyer. balance. can

So we're those areas at. are looking the

I say, M&A overall, slower a right is the climate now, front. bit little would on the

have bought a of come come think sponsors, and I the sell businesses to where have multiples. paid down. is higher the sort the reason by overpaid. because been lot a out sponsors lot of little They're They a multiples try to of remiss that

moment. I taking And bit a wait-and-see more little they're attitude so at of the think a

So as our we we years seeing be X use aren't quite many right primary call of that's going to as X, M&A. cash did, ago. But now deals it, is

garden. digital that's business, and as on at invest see Secondarily, to digital through success frankly because M&A future. and the And do do now the in of e-com front, right to in want up in channel game up of capabilities. and lots acquisitions that and set need well we get also us growing as pet and it's the both we area type where our really as fastest for And an we look better the we capabilities,

Shovana Chowdhury

pets, mentioned In POS in shipments. the question. commentary, your quick outperform you Another the

you a mean quarter? inventory If retailer color... So pressures? does inventory -- exiting was more add there shape could any Or that is good the in

John Hanson

one. take is I Yes. John. This can that

focus Our throughout change pet a inventory. has a fact good across is retail position to doesn't industry, the been inventory the year. that in the tighten That there

going it? we more against and are to see So new a successful Absolutely. customers programs little being having some

As we But good well. end our our I in position is shape. on as want inventory to think tighten continue inventory to

that see very be see also and we seeing we're -- quarter-to-quarter, But changes what right here. feel do also outpacing might You POS well ships. some that do good is

Nicholas Lahanas

On now the feel the retail. right in We inventories. overhang our pet we about side, a really have at lot of don't market good

J. Walker

of garden course, And on that's -- mid-single digits. in the side, in is up we aggregate, I aggregate. And but exited that, think with inventories the it's -- quarter

inventory If the you and look earlier our side. on a grass more basis, inventories that on grass category most companies I it high at said

in So bad in it's having lumpy. But aggregate, all. position at we're not said a that,

good season a in of burn season, some advance a position so the able the we year. ahead season to in and still we be fall still us, be inventory through of With that should have next of

Shovana Chowdhury

I last may. One if question,

this have that, weather year and uncontrollable. is the not with course, third row I'm in a luck it's you mistaken, had Given if that bad of

business to fiscal weather? that bad the else businesses anything years other might be luck the offset, third any segment, live in for plants. Garden business you should future say, let's given So looking quarter fiscal live the is somehow be another there biggest you into, of Are or with thinking

Nicholas Lahanas

Yes.

are We looking at that. always

earlier a some In can to more little side. that and garden probably the it I that's lumpiness M&A, we on see the side, spoke on because were bit a that less offset little of the has help fact, we seasonality much biased pet when why about

the reason bit that's a little more So pivoting to for pet. over

Operator

question of William Bank comes Reuter from Our with America. next

William Reuter

one being M&A there responding out mentioned opportunities larger Or opportunities uses there When you of Are were almost you could larger cash, entirely of be opportunities? about there's M&A the tuck-ins? there there. fewer out

Nicholas Lahanas

mean the take Yes. to They're ones do. little I a all the harder obviously bit larger to longer of do. above,

So really both. looking at we're

We have a M&A. terms approach of two-pronged in

We the and to that's we the have focused dedicated have larger bolt-ons then tuck-ins. is another team team And on actually the also a deals.

So we're at looking both.

William Reuter

of Got California then facility. it. And out moved you this

the to that up You value change into also any meaningful going that that consolidation sale have DC for be X X. are sheet? Are this of there facilities going balance to your are complexion have

Nicholas Lahanas

No. materially. I mean not

already. cash of lot a have We

obviously, we So non-GAAP it's sell, we would that. And then that to. not going anything, would

So real we're business. not really estate in the

of anything magnitude. of yes, that's So any don't see sort I

William Reuter

of then basis on call, response mentioned I questions the X,XXX you And the one to in earlier points. think Okay.

the margin garden live the think I was good lawn for component of and the business? that

Nicholas Lahanas

was of goods. that contraction Yes, the live

William Reuter

right? of is quarter Which XX% Is typically. that like the

Nicholas Lahanas

on tracking it which to just year, had had but on whole the much only it an degree of only affected the live to the Not contracted. vis-a-vis gone how margins how trying is. order much goods business I quarter speaking not give of I the magnitude the to why company. prior was was garden, the down and

William Reuter

live goods how shared quarter you is typically Have your in before? third much

Nicholas Lahanas

BUs would say goods call that No. QX very a is pretty in quarter. I said specific. this we We don't that out Live the consistently. specifically

is quarter. that it volume massively its in amount doing So a disproportionate of

So it's a very important quarter.

Operator

Carla from Casella JPMorgan. with Our next question comes

Carla Casella

could But the shipping, wondering what -- tariff at you're have You've get on there we are exposed to of any kind freight, of already And this do point international seeing taken goods exposed of some tariffs what in and on subject. if terms questions regime? terms you're that a robust costs? there you then be or in just seeing more

Nicholas Lahanas

Yes.

been probably lower tariffs too Asia. haven't goods to in It's tariffs, lot coming of the are would in still We stable. impacted but I'm than freight. less from what during if much to We're it's the first some going it was exposure have first place. X% a ocean our fairly by there were like than go when Trump We put regime,

an So going it to have but yes, it's a impact, huge impact. not will have

Carla Casella

the And much are say -- happened were you move it what had can opportunities -- now of you it pricing to these the best what Was mitigate do you And regime, -- or how in production? cycles? how say when to you have in it would mitigants? would last the first best

Nicholas Lahanas

places started goods. source a it to X-pronged where other for we approach the was Yes, like looking

Asia So of other the doing many that. countries we think in of cases, lot some our were some had folks In of a Asia, risks. assume I vendors in

And blunt little price and us flat to price because help a then take tariff. give a you would bit of third out they more the out pricing, a just go on increase where which the So break was offset is tariff.

Friederike Edelmann

our question. This answer was IR available The additional everyone, call last you is have. our today. for Thank joining to any team you, questions may

back now. Turning to Rob it

Operator

conference. today's concludes This

for we your thank participation. disconnect may You lines and your you at this time,

Central Garden & Pet (CENT) 7 Aug 242024 Q3 Earnings call transcript