Central Garden & Pet (CENT) Raises Guidance Even As Sales Slide

Central Garden & Pet (CENT) reported robust third-quarter fiscal 2026 results while raising its full-year profit outlook, despite a 8% decline in net sales to $882 million. The company's gross margin expanded by 130 basis points to 35.9%, and non-GAAP operating margin climbed by 90 basis points to 15.4%, largely due to the exit of its pet distribution business, which had lower margins.

Organic net sales rose 2% to $862 million when this exit is excluded. The Garden segment drove growth, with sales up 3% to $482 million and segment operating margin increasing by 100 basis points to 18.7%. CENT raised its fiscal 2026 non-GAAP diluted EPS outlook from $2.70 to $2.85, indicating optimism for the future. Additionally, CENT announced a definitive agreement to acquire an 80% stake in TRIXIE, a European pet supplies and snacks company, for up to €400 million.

This acquisition could expand CENT's international reach to about 10% of total sales. However, GAAP diluted EPS and non-GAAP EPS still declined, and net income dropped 5% to $90 million. The Pet segment continues to be a concern, with net sales falling 19% to $400 million, though organic Pet sales grew 2% to $380 million. The integration risk associated with the TRIXIE acquisition adds complexity to the deal.

Hedge fund ownership of CENT increased from 27 to 28 funds, suggesting continued institutional interest. The stock's forward P/E of 13 suggests potential upside if the TRIXIE deal and margin trends materialize. Overall, CENT's improved margins and guidance are positive, but sales and per-share earnings declines pose challenges for investors.