Loss Widens at Central Garden - Analyst Blog
February 03 2012 - 7:30AM
Zacks
Central Garden & Pet
Company (CENT) recently reported sluggish first-quarter
2012 results, battered by higher input costs, altered product mix
and the seasonal nature of the lawn and garden category.
The company’s quarterly loss of 27
cents a share widened from a loss of 16 cents per share delivered
in the prior-year quarter. The analyst covered by Zacks had
expected the company to deliver a loss of 26 cents per share in the
reported quarter.
However, total revenue for the
quarter increased 7% to $302.1 million, reflecting sales growth in
garden and pet products segment. Moreover, the company’s reported
net sales surpassed the Zacks Consensus Revenue Estimate of $290
million.
During the reported quarter, gross
profit shrinked 2.8% to $80.7 million, whereas gross margin
contracted 280 basis points to 26.7%. The decline reflected a rise
in raw material costs and sales of lower margin products. Total
operating loss for the quarter was $11.3 million, indicating a
significant widening of loss from the year-ago quarter.
Central Garden & Pet, one of
the leading producers and marketers of premium and value-oriented
products, focuses on the lawn & garden and pet supplies markets
in the U.S.
Garden Products segment sales
increased 8% year over year to $102.8 million. However, due to high
raw material costs for bird feed and by product mix, the segment
reported an operating loss of $11.1 million during the quarter. The
reported operating result was even worst from the prior-year
quarter, where it reported a loss of $8 million.
According to the company, the
Garden Products segment’s branded product sales came in at $89.9
million, whereas sales of other manufacturers’ products came in at
$12.9 million during the quarter.
Pet Products segment sales
increased 7% to $199.3 million. However, the segment’s operating
income decreased 14.9% to $9.7 million from $11.4 million,
reflecting a continued rise in raw material costs and higher trade
and consumer spending.
The segment’s branded product sales
came in at $156.6 million, whereas sales of other manufacturers’
products were $42.7 million during the quarter.
Central Garden & Pet, which
faces stiff competition from The Scotts Miracle-Gro
Company (SMG), ended the quarter with cash and cash
equivalents of $10.3 million, long-term debt of $460.3 million and
shareholders’ equity of $424.5 million.
The company bought back 2.6 million
shares for $20.9 million during the quarter under review, under its
$100 million share repurchase program approved in June 2011.
Currently, we maintain a long-term
‘Neutral’ recommendation on the stock. Moreover, Central Garden
& Pet has a Zacks #2 Rank, which translates into a short-term
‘Buy’ rating.
CENTRAL GARDEN (CENT): Free Stock Analysis Report
SCOTTS MIRCL-GR (SMG): Free Stock Analysis Report
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