CENT 10-K & 10-Q changes, risk factors and insider trading
Central Garden & Pet Co. (also CENTA) · Nasdaq · Wholesale-Miscellaneous Nondurable Goods · CIK 887733 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Removed heading “Our business is dependent upon our ability to continue to source products from China.”
Removed heading “We identified material weaknesses in our internal control over financial reporting during fiscal 2023 and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements or otherwise adversely affect the accuracy, reliability or timeliness of our financial statements.”
Largest changes
“We identified material weaknesses in our internal control over financial reporting during fiscal 2023 and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements or otherwise adversely affect the accuracy, reliability or timeliness of our financial statements.”see in full comparison
As part of our annual goodwill impairment testing, in fiscalsee in full comparison20242025 we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting segments under the goodwill impairment test. We completed our qualitative assessment of potential goodwill impairment and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amount in fiscal 2025, and accordingly, no further testing of goodwill was required in fiscal 2025. In connection with our annual goodwill impairment testing performed during fiscal 2024, we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting segments under the goodwill impairment test. We completed our qualitative assessment of potential goodwill impairment and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amount in fiscal 2024, and accordingly, no further testing of goodwill was required in fiscal 2024. In connection withtheour annual goodwill impairment testing performed during fiscal 2023, we elected to bypass the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test. We completed our quantitative assessment of potential goodwill and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amounts.In connection with the our annual goodwill impairment testing performed during fiscal 2022, we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting segments under the goodwill impairment test. We completed our qualitative assessment of potential goodwill impairment and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amount in fiscal 2022, and accordingly, no further testing of goodwill was required in fiscal 2022.
“Our business is dependent upon our ability to continue to source products from China.”see in full comparison
“Management established a remediation plan that involved implementing additional controls to ensure that access and program change management controls are designed and operating effectively and that we have effective controls relating to outsourced service providers and the data they provide. The remediation plan was implemented and tested during fiscal 2024 and deemed effective. However, we cannot provide assurance that additional material weaknesses in our internal controls will not be identified in the future. …”see in full comparison
“As described under Item 9A. "Controls and Procedures" below, we concluded that material weaknesses in our internal control over financial reporting existed as of September 30, 2023 and, accordingly, our internal control over financial reporting and our disclosure controls and procedures were not effective as of such date. …”see in full comparison
“We outsource a portion of our manufacturing requirements to third-party manufacturers located in China. This subjects us to a number of risks, including: the impact of Chinese public health and contamination risks on manufacturing; quality control issues; social and political disturbances and instability; export duties, import controls, tariffs, quotas and other trade barriers; shipping and transportation problems; and fluctuations in currency values. These risks may be heightened by threatened changes in the U.S. …”see in full comparison
Full comparison: every changed paragraph (23)
Economic uncertainty and other adverse macro-economic conditions, including high interest ratesrate fluctuations and potential tariffs, may harm our business.
Our revenues and margins are dependent on various economic factors, including interest rates, the potential of an economic recession, trade tariffs, energy costs, consumer attitudes toward discretionary spending, currency fluctuations, rates of inflation and other macro-economic factors which may impact consumer spending. While the rate of inflation continued to slowmoderated during fiscal 2024,2025, and a recession has not materialized, interest rates remain high and the imposition of tariffs on imports by the new presidentialU.S. administration couldhas resultresulted in higher input costs. If we are unable to pass through higher input costs by raising the price of our products,products or altering our sourcing, we may experience organic sales declines and gross margin and operating income declines.
During 2025, the 2024U.S. presidentialAdministration campaign,has the President-Elect stated his intention to imposeimposed significant tariffs on goods imported from China and other countries. During the President-Elect’s prior administration, the United States imposed a series of tariffs,imported, ranging from 5%a 10% baseline to 25%,much higher rates on a variety of importsimports. fromIn Chinafiscal and2025, subsequently implemented tariffs on additional goods imported from China. Lessless than 15% of our cost of goods sold iswas from products or materials sourced from outside the United States, including less than 5%primarily from China.China, Brazil and Mexico. To the extent the United States imposes new or additional tariffs on Chinathese or other countries,countries where we or our suppliers source products, or if new or additional tariffs or trade restrictions are implemented by the United States or other countries in connection with a global trade war, the cost of our products manufactured in China or other countries,countries and imported into the United States could increase significantly, which in turn could adversely affect the demand for these products and have a material adverse effect on our business and results of operations.
Our business is dependent upon our ability to continue to source products from China.
We outsource a portion of our manufacturing requirements to third-party manufacturers located in China. This subjects us to a number of risks, including: the impact of Chinese public health and contamination risks on manufacturing; quality control issues; social and political disturbances and instability; export duties, import controls, tariffs, quotas and other trade barriers; shipping and transportation problems; and fluctuations in currency values. These risks may be heightened by threatened changes in the U.S. government's trade policies, including the continuation of tariffs on goods imported from China or the imposition of any new or increased tariffs. Because we rely on Chinese third-party manufacturers for a significant portion of our product needs, any disruption in our relationships with these manufacturers or significant increase in import tariffs could adversely affect our results of operations.
Our sales ultimately depend on consumer discretionary spending, which is influenced by factors beyond our control, including high interest rates, the potential for trade tariffs, a return to an inflationary environment or an economic recession, other general economic conditions, the availability of discretionary income and credit, weather, consumer confidence and unemployment levels. Any material decline in consumer discretionary spending could reduce our sales and harm our business. For example, in the last few years, we have seen a decline in demand for durable goods in certain of our categories, resulting in part from the residual effect of inflated demand for durable goods in the early years of the COVID-19 pandemic. Unfavorable economic and market conditions may also place a number of our key retail customers under financial stress, which would increase our credit risk and potential bad debt exposure.
•the uncertain macro-economic environment, including highelevated interest rates and the potential imposition of trade tariffs, could lead to a recession, and the impact any of those could have on consumer discretionary spending;
•supply chain and sourcing disruptions, including due to the volatile geopolitical environment and the potential imposition of trade tariffs on countries from which we import products;
If we are unable to execute on our Cost and Simplicity Program,Agenda, our ability to maintain or grow margins may be negatively impacted.
Our Cost and Simplicity programagenda involves reducing costs, including procurement, logistics, manufacturing, portfolio optimization and administrative, and reducing complexity through fewer SKUs, plants and distribution centers. Optimizing our supply chain footprint and having the right facilities in the right locations is critical to lowering costs. We plan to simplify our business and improve our efficiency across the organization by rationalizing our footprint, streamlining our portfolio, and improving our cost structure. There can be no assurance that we will be able to successfully execute our Cost and Simplicity programagenda or that we will be able to do so within the anticipated time period, which could adversely impact our ability to improve or maintain margins and enhance long-term profitability.
In the past, periods of high inflation or supply constraints have resulted in higher costs for bird feed and grass seed. Beginning in fiscal 2023, there has been a prolonged oversupply of grass seed, which has resulted in a significant decline in market prices. As a result of this decline, in fiscal 2024, we incurred an approximately $15-$20 million charge to write-down the value of our grass seed inventory. In fiscal 2025, grass seed market prices remained low although the oversupply of grass seed is beginning to moderate. We can provide no assurance as to the timing or extent of our ability to implement price increases in the event of high costs in the future, or our ability to maintain pricing with our retailers in the context of declining costs. We also cannot predict to what extent price increases may negatively affect our sales volume or price decreases may result in further inventory write-downs. As retailers pass along price increases, consumers may shift to our lower margin bird feed, switch to competing products or reduce purchases of wild bird feed products. The same shift in consumer behavior could adversely affect our business in other product categories which experience substantial price increases.
Home Depot,Walmart, our largest customer,customer in fiscal 2025, represented approximately 17% of our total company net sales in fiscal year 20242025 and 16% of our total company net sales in fiscal 2023 and 2022. Walmart, our second largest customer, represented approximately 16% of our total company net sales in fiscal 2024 and 2023,2023. andHome 17%Depot, our second largest customer in fiscal 2022. Costco, our third largest customer,2025, represented approximately 8%, 7% and 6%16% of our total company net sales in fiscal 2024,2025, 20232024 and 2022,2023. respectively.Costco, Lowe's and Amazon are also significant customers, and together with Walmart,Walmart and Home Depot and CostcoDepot, accounted for approximately 54% of our net sales in fiscal 2025 and 2024. The market shares of many of these key retailers have increased and may continue to increase in future years.
We sell our products through a variety of trade channels with a significant portion dependent upon key retailers, through both traditional brick-and-mortar retail channels and eCommerce channels, including Amazon. The eCommerce channel continues to grow rapidly. To the extent that the key retailers, including retailers in the pet specialty segment, on which we depend lose share to the eCommerce channel, we could lose sales. We continue to make additional investments to access this channel more effectively, but there can be no assurances that any such investments will be successful. If we are not successful in developing and utilizing eCommerce channels that consumers may prefer, we may experience lower than expected revenues.
A significant deterioration in the financial condition of one of our major customers or several smaller customers could have a material adverse effect on our sales, profitability and cash flow. If one or more of these customers were to cancel product orders, become insolvent, or otherwise be unable or fail to pay for our products in a timely manner, our operating results and financial condition could be materially and adversely affected. We continually monitor and evaluate the credit status of our customers and attempt to adjust sales terms as appropriate. Despite these efforts, a bankruptcy filing or liquidation by a key customer could have a material adverse effect on our business, results of operations and financial condition in the future.
We are incurring costs associated with designing and implementing enterprise resource planning (ERP) software systems with the objective of gradually migrating our businesses to one or the other of two systems. The choice of which is to be used for each business is dependent on the needs of the business unit. These two systems are replacing numerous accounting and financial reporting systems, most of which have been obtained in connection with business acquisitions. To date, we have reduced the number of ERP systems from 47 to 11.
We are incurring costs associated with designing and implementing enterprise resource planning (ERP) software systems and gradually migrating our businesses to one or the other of two systems. The choice of which is to be used for each business is dependent on the needs of the business unit. These two systems are replacing numerous accounting and financial reporting systems, most of which have been obtained in connection with business acquisitions. To date, we have reduced the number of ERP systems from 46 to 6. Capital expenditures for our enterprise resource planning software systems for fiscal 2025 and beyond will depend upon the pace of conversion for those remaining legacy systems. If the balance of the implementation is not executed successfully, we could experience business interruptions or material weaknesses relating to IT controls of acquired companies. For example, in fiscal 2023 we identified two material weaknesses related to our Live Plants and Green Garden businesses whose IT systems had not been fully integrated into our corporate IT control structure. The material weaknesses were resolved during fiscal 2024, but there is no assurance that we may not experience similar IT control issues in the future. If we do not complete the implementation of the project timely and successfully, we may experience, among other things, additional costs associated with completing this project and a delay in our ability to improve existing operations, support future growth and take advantage of new applications and technologies. All of this may also result in distraction of management, diverting their attention from our operations and strategy.
During fiscal 2024,2025, 20232024 and 2022,2023, we performed evaluations of the fair value of our indefinite-lived trade names and trademarks. Our expected revenues were based on our future operating plan and estimates of market growth or decline for future years. InAs fiscala 2024,result, we recorded a non-cash impairment charge in our Pet segment of $12.8$1.0 million, andmillion in fiscal 2023,2025, we$12.8 recordedmillion impairmentin chargesfiscal of2024, approximatelyand $7.5 million and $3.9 million in our Pet and Garden segments.segments, There was no impairment loss recordedrespectively in fiscal 2022.2023.
As part of our annual goodwill impairment testing, in fiscal 20242025 we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting segments under the goodwill impairment test. We completed our qualitative assessment of potential goodwill impairment and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amount in fiscal 2025, and accordingly, no further testing of goodwill was required in fiscal 2025. In connection with our annual goodwill impairment testing performed during fiscal 2024, we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting segments under the goodwill impairment test. We completed our qualitative assessment of potential goodwill impairment and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amount in fiscal 2024, and accordingly, no further testing of goodwill was required in fiscal 2024. In connection with the our annual goodwill impairment testing performed during fiscal 2023, we elected to bypass the qualitative assessment and proceeded directly to performing the quantitative goodwill impairment test. We completed our quantitative assessment of potential goodwill and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amounts. In connection with the our annual goodwill impairment testing performed during fiscal 2022, we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting segments under the goodwill impairment test. We completed our qualitative assessment of potential goodwill impairment and determined that it was more likely than not the fair values of our reporting segments were greater than their carrying amount in fiscal 2022, and accordingly, no further testing of goodwill was required in fiscal 2022.
We identified material weaknesses in our internal control over financial reporting during fiscal 2023 and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements or otherwise adversely affect the accuracy, reliability or timeliness of our financial statements.
As described under Item 9A. "Controls and Procedures" below, we concluded that material weaknesses in our internal control over financial reporting existed as of September 30, 2023 and, accordingly, our internal control over financial reporting and our disclosure controls and procedures were not effective as of such date. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. As a result of its evaluation, management identified two material weaknesses: (1) in information technology general computer controls ("ITGCs") relating to access and program change management controls and (2) controls relating to an outsourced service provider at two acquired businesses whose IT systems had not yet been fully integrated with our corporate IT control structure.
Management established a remediation plan that involved implementing additional controls to ensure that access and program change management controls are designed and operating effectively and that we have effective controls relating to outsourced service providers and the data they provide. The remediation plan was implemented and tested during fiscal 2024 and deemed effective. However, we cannot provide assurance that additional material weaknesses in our internal controls will not be identified in the future. Effective internal control over financial reporting is necessary for us to provide reliable and timely financial reports and, together with adequate disclosure controls and procedures, are designed to reasonably detect and prevent fraud. The occurrence of, or failure to remediate, these material weaknesses and any future material weaknesses in our internal control over financial reporting may adversely affect the accuracy and reliability and timeliness of our financial statements and have other consequences that could materially and adversely affect our business.
Our performance is substantially dependent upon the continued services of our senior management team. The loss of the services of these persons could have a material adverse effect on our business. OurIn formerSeptember Chief Executive Officer resigned in October 2023, and2024, our Chief Financial Officer was promoted to Chief Executive Officer in September 2024 and the former chief financial officer of our Pet segment was promoted to our Chief Financial Officer. Our future performance depends on the continued success of our recently promoted Chief Executive Officer and Chief Financial Officer and our ability to attract and retain skilled employees in all facets of our business, including management and manufacturing and distribution. We cannot assure you that we will be able to retain our existing personnel or attract additional qualified employees in the future.
We are a party to litigation alleging that the applicator developed and used by us for certain of our branded topical flea and tick products infringes a patent held by Nite Glow Industries, Inc. and asserting claims for breach of contract and misappropriation of confidential information. On June 27, 2018, a jury returned a verdict in favor of Nite Glow on each of the three claims and awarded damages of approximately $12.6 million, which was reduced to $12.4 million. We filed our notice of appealappeal, and the plaintiffsplaintiff cross-appealed. On July 14, 2021, the Federal Circuit Court of Appeals concluded that the Company did not infringe plaintiff's patent and determined that the breach of contract claim raised no non-duplicative damages and should be dismissed. The court affirmed the jury's liability verdict on the misappropriation of confidential information claim but ordered a new trial on damages on that single claim limited to the "head start" benefit, if any, generated by the confidential information. The retrial of the “head start” damages issue concluded in March 2024, butand nothe court issued its decision hason beenSeptember issued30, by2025 awarding the Court.plaintiff $5.0 million. The judgment was entered on October 17, 2025 in the amount of $7.2 million, including prejudgment interest. We intend to vigorouslyappeal pursuethe our defenses in any future proceedingsjudgment and believe that we will prevail on the merits as to the head start damages issue. While we believe that the ultimate resolution of this matter will not have a material impact on our consolidated financial statements, the outcome of litigation is inherently uncertain and the final resolution of this matter may result in expense to us in excess of management's expectations.
Management's Discussion & Analysis (MD&A)
New heading “Wind-down of U.K. Operations”
New heading “Facility Closures”
New heading “Fiscal 2025 Compared to Fiscal 2024”
Removed heading “Cost and Simplicity program - Facility Closures and Business Exit”
Removed heading “Litigation Settlement Gain and Investment Impairment”
Removed heading “Fiscal 2024 Acquisition”
Removed heading “Fiscal 2023 Compared to Fiscal 2022”
Largest changes
“Litigation Settlement Gain and Investment Impairment”see in full comparison
“Our revenues and margins are dependent on various economic factors, including rates of inflation, energy costs, interest rates, consumer attitudes toward discretionary spending, currency fluctuations, and other macro-economic factors which may impact levels of consumer spending. In fiscal years 2021 through 2023, we were adversely impacted by high input costs due to inflation, particularly relating to prices for grain and seed, fuel and the ingredients used in our garden controls and fertilizer business as well as heightened import costs such as shipping container costs and tariffs. …”see in full comparison
“Our revenues and margins are dependent on various economic factors, including fluctuating rates of inflation on various input costs (e.g., commodities and energy), interest rates, currencies and consumer attitudes toward discretionary spending. Inflation moderated in fiscal 2024 and into the first half of fiscal 2025 before increasing in the second half of fiscal 2025 due primarily to the increasing impact of tariffs. We have benefited from lower cost inventory and significant productivity gains resulting in improved margins. …”see in full comparison
“Operating income improved $64.7 million, or 34.9%, to $250.0 million in fiscal 2025. Operating income improved due to a $53.6 million increase in gross profit, related to a 240-basis point increase in gross margin, and a $11.1 million decrease in selling, general and administrative expenses. These improvements were partially offset by a $71.4 million decrease in net sales. Our operating margin improved to 8.0% in fiscal 2025 from 5.8% in fiscal 2024. …”see in full comparison
“Selling, general and administrative expenses increased $22.1 million, or 3.0%, from $736.2 million in fiscal 2023 to $758.3 million in fiscal 2024. As a percentage of net sales, selling, general and administrative expenses increased from 22.2% in fiscal 2023 to 23.7% in fiscal 2024. The increase was due to $21.1 million in expense related to the closure of facilities in both the Pet and Garden segments and intangible asset impairments, partially offset by the gain from a litigation settlement. …”see in full comparison
“In connection with our annual goodwill impairment testing performed during fiscal year 2024, we made a qualitative evaluation about the likelihood of goodwill impairment to determine whether it was necessary to calculate the fair values of our reporting segments under the goodwill impairment test. …”see in full comparison
Full comparison: every changed paragraph (119)
•Net sales for fiscal 20242025 decreased $109.6$71.4 million, or 3.3%,2.2%, to $3.2$3.1 billion. OrganicPet net sales decreased 3.9%$30.8 withmillion, Petor organic sales decreasing 5.9%1.7%, and Garden organicnet sales decreasingdecreased 1.2%.$40.6 million, or 3.0%.
•Gross profit for fiscal 20242025 declinedincreased $3.1$53.6 million, or 0.3%,5.7%, to $943.7$997.3 million whileand gross margin increased 90240 basis points in fiscal 20242025 to 29.5%,31.9%, from 28.6%29.5% in fiscal 2023.2024. On a non-GAAP basis, gross margin increased 110210 basis points in fiscal 2024.2025.
•Our operating income declinedincreased $25.3$64.7 million, or 12.0%,34.9%, to $185.4$250.0 million in fiscal 2024.2025. On a non-GAAP basis, operating income declinedincreased $4.4$42.2 millionmillion, or 19.0%, in fiscal 2024.2025.
Wind-down of U.K. Operations
Cost and Simplicity program - Facility Closures and Business Exit
The following activities reflect our ongoing network optimization initiative to achieve a simpler, more efficient manufacturing and distribution network.
In our Pet segment, during the fourth quarter of fiscal year 2024, as part of our Cost and Simplicity program we decided to close a manufacturing facility in California, which we plan to exit in June 2025, and a facility in Arizona, which we plan to exit in January 2025. The associated pet bed, outdoor cushion and durable pet supply manufacturing and distribution activities will be transitioned to Central facilities in Indiana and North Carolina. As a result, we incurred approximately $7.5 million of one-time costs, including $5.2 million in cost of goods sold and $2.3 million in selling, general and administrative costs, comprised of charges for facility closures, the impairment of inventory and severance, the majority of which were non-cash. Additionally, related to the pet supplies business activities being transitioned, we recognized a non-cash impairment charge of $12.8 million related to the impairment of intangible assets due primarily to changing market conditions resulting from the decline in demand for durable products and increased international competition.
In our Garden segment, during the fourth quarter of fiscal year 2024, we recognized incremental expense of $3.9 million in selling, general and administrative expenses, related to facility closures and business exits announced in fiscal 2023 and earlier in fiscal 2024.
In ourMarch Garden segment, during the third quarter of fiscal year 2024, as part of our Cost and Simplicity program and in response to changing market conditions,2025, we decided to exitwind-down our operations in the potteryUnited businessKingdom, which wealso expectserved certain European markets, and move to be completed by calendar year-end 2025. Additionally, we closed a livedirect-export goodsmodel. distribution facility in Delaware and relocated our grass seed research facility from Oregon to Texas. As a result, inDuring fiscal 20242025, we incurred approximately $10.9$10.0 million of one-time closure costs, including $8.6$5.6 million in cost of goods sold and $2.3$4.4 million in selling, general and administrative costs,expense. comprisedThe ofamounts chargeswere forprimarily related to the impairmentliquidation of inventory and facilityreceivables, closures,severance theand majoritylegal of which were non-cash.costs.
Facility Closures
During fiscal 2025, we began the consolidation of two legacy distribution facilities in Ontario, California and Salt Lake City, Utah into a new modern facility in Salt Lake City, Utah, reflecting our ongoing network optimization initiative to achieve a simpler, more efficient distribution network. As a result, we recognized $5.0 million in selling, general and administrative expense, composed primarily of charges for lease and severance costs.
In our Garden segment, during the second quarter of fiscal year 2024, as part of our Cost and Simplicity program we decided to close a manufacturing facility in California. Additionally, in the second quarter, we began the Southeast consolidation of four distribution locations into one new modern facility, which we expect to be completed by calendar year-end. As a result, we incurred approximately $5.3 million of one-time costs, including $2.5 million in cost of goods sold and $2.8 million in selling, general and administrative costs, comprised of charges for facility closures, severance, and impairment of inventory, the majority of which were non-cash.
Litigation Settlement Gain and Investment Impairment
Within corporate, we recognized a gain of $3.2 million during the fourth quarter of fiscal 2024, for the settlement of litigation, which is included in selling, general and administrative expense. Additionally, we recognized a $7.5 million non-cash impairment charge for two related private company investments that is included within Other income (expense) in the consolidated statement of operations.
Stock Dividend
In December 2023, our Board of Directors approved a stock dividend in the form of one share of the Company's Class A Common Stock for every four outstanding shares of its Common Stock, Class A Common Stock and Class B Stock, which shares were distributed on February 8, 2024, to stockholders of record as of January 8, 2024.
The stock dividend did not affect the number of the Company's authorized shares and the par value of each share of stock remained unchanged. Proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options, restricted stock and performance share units outstanding at January 8, 2024, which resulted in a proportional increase in the vesting of such stock options, restricted stock and performance share units, and, in the case of stock options, a proportional decrease in the exercise price of all such stock options.
Unless noted, all Class A Common share and per share amounts contained in this Form 10-K have been retroactively adjusted to reflect the one-for-four stock dividend.
Fiscal 2024 Acquisition
In November 2023, we acquired TDBBS, LLC (“TDBBS”), a provider of premium natural dog chews and treats for approximately $60 million. The addition of TDBBS expands our portfolio with bully and collagen sticks, bones and jerky, adds scale to our dog and cat business and enhances our eCommerce and direct-to-consumer capabilities.
Since ourDuring fiscal year ended September 28, 2024 through November 21, 2024,2025, we repurchased 1.33.2 million shares of our non-voting common stock (CENTA) and 0.41.4 million shares of our voting common stock (CENT) on the open market at an aggregate cost of $51.7$148.4 million. As of NovemberSeptember 21,27, 2024,2025, we had $30.3$46.5 million remaining under our 20192024 Repurchase Authorization.
Tax Reform
On July 4, 2025, H.R. 1, commonly known as the “One Big Beautiful Bill Act” (the “OBBBA”), was enacted into law. The OBBBA contains numerous federal tax provisions including modifications to the capitalization of research and development expenses, limitations on deductions for interest expense, and accelerated fixed asset depreciation. Because the OBBBA was enacted during fiscal 2025, we have reflected the impact of the provisions that were effective during the year in our income tax provision. The impact of the OBBBA on our fiscal 2025 consolidated financial statements was not material. We will continue to monitor the OBBBA and any related regulatory or interpretive guidance and will update our accounting in future periods as required.
Fiscal 2025 Compared to Fiscal 2024
Net sales for fiscal 2025 decreased $71.4 million, or 2.2%, to $3,129.1 million from $3,200.5 million in fiscal 2024. Our branded product sales, which include products we produce under Central brand names and products we produce under third-party brands, decreased $30.6 million, and sales of other manufacturers’ products decreased $40.8 million. In fiscal 2025, sales of branded products represented approximately 79% of our net sales, compared to 78% in fiscal 2024, and sales of other manufacturers' products represented 21% of our net sales.
Pet net sales decreased $30.8 million, or 1.7%, to $1,802.0 million in fiscal 2025 from $1,832.8 million in fiscal 2024. The decline in Pet net sales was due primarily to lower sales of durable items impacting our outdoor cushions, pet beds and aquatics businesses. These declines were partially offset by increased sales in our animal health business. Pet branded sales decreased $36.0 million, and sales of other manufacturers' products increased $5.2 million.
Garden net sales decreased $40.6 million, or 3.0%, to $1,327.1 million in fiscal 2025 from $1,367.7 million in fiscal 2024. The decline in Garden net sales was due primarily to decreased sales of third-party products resulting from the loss of distribution of two product lines and our planned exit of the pottery business. Increased sales of wild bird feed and private label products were partially offset by decreased sales in both our controls and live plants businesses due to cool and wet weather during the early part of the garden season. Garden branded sales increased $5.4 million, and sales of other manufacturers' products decreased $46.0 million.
Gross profit in fiscal 2025 increased $53.6 million, or 5.7%, to $997.3 million from $943.7 million in fiscal 2024. Gross margin improved 240 basis points to 31.9% in fiscal 2025 from 29.5% in fiscal 2024. Pet and Garden both contributed to the increase in gross profit and gross margin.
Gross profit in Pet, in both fiscal 2024 and 2025, and Garden, in fiscal 2024, was impacted by facility closure projects under our Cost and Simplicity agenda. On a non-GAAP basis, excluding approximately $6 million in charges associated with the facility closures in fiscal 2025 and approximately $16 million in fiscal 2024, gross profit increased $42.8 million and gross margin improved 210 basis points to 32.1% in fiscal 2025 from 30.0% in fiscal 2024.
The increase in gross profit and gross margin in Pet was due primarily to efficiency gains and structural improvements resulting from productivity initiatives under our Cost and Simplicity agenda and some commodity price deflation. These improvements more than offset the impact of tariffs.
The increase in gross profit and gross margin in Garden was due primarily to improvements in our Live Goods business in fiscal 2025, from cost reduction initiatives under our Cost and Simplicity agenda and the adverse impact in fiscal 2024 from the write-down of the value of our grass seed inventory in fiscal 2024 of approximately $20 million, due to a significant decrease in the market prices of grass seed and an industry-wide over supply of grass seed.
Selling, general and administrative expenses decreased $11.0 million, or 1.5%, from $758.3 million in fiscal 2024 to $747.3 million in fiscal 2025. As a percentage of net sales, selling, general and administrative expenses increased from 23.7% in fiscal 2024 to 23.9% in fiscal 2025. The decrease in selling, general and administrative expense was due to $21.1 million in additional costs incurred in the prior year related to the closure of facilities in both the Pet and Garden segments and intangible asset impairments as compared to $9.4 million in additional costs in fiscal 2025 related to facility closures. Excluding these additional costs in both fiscal 2025 and 2024, non-GAAP selling, general and administrative expense increased $0.6 million to $737.9 million from $737.3 million in fiscal 2024. Decreased selling, general and administrative expenses in both Pet and Garden were partially offset by increased expense at corporate.
Selling and delivery expense increased $6.1 million, or 1.8%, to $345.9 million for fiscal 2025 from $339.9 million for fiscal 2024. An increase in the Pet segment, related to increased marketing expense, including promotional and digital marketing spend, and at corporate, related to marketing investment expense, was partially offset by a decrease in the Garden segment due primarily to lower discretionary marketing spend and lower delivery expense.
Warehouse and administrative expense decreased $17.1 million, or 4.1%, to $401.4 million for fiscal 2025 from $418.5 million for fiscal 2024. Decreased expense in the Pet segment, due primarily to intangible asset impairments in fiscal 2024, and in the Garden segment, related to lower facility closure costs in fiscal 2025 as compared to fiscal 2024, were partially offset by increased corporate expense.
Corporate expense increased $8.1 million due primarily to increased variable compensation expense, increased marketing investment and the nonrecurrence of a gain from a litigation settlement in fiscal 2024. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.
Operating income improved $64.7 million, or 34.9%, to $250.0 million in fiscal 2025. Operating income improved due to a $53.6 million increase in gross profit, related to a 240-basis point increase in gross margin, and a $11.1 million decrease in selling, general and administrative expenses. These improvements were partially offset by a $71.4 million decrease in net sales. Our operating margin improved to 8.0% in fiscal 2025 from 5.8% in fiscal 2024. Excluding the impact of facility closures in fiscal 2025 and 2024 and intangible asset impairments in fiscal 2024, non-GAAP operating income improved $42.2 million and our non-GAAP operating margin improved to 8.5% in fiscal 2025 from 7.0% in fiscal 2024. These improvements were due primarily to efficiency gains and cost reductions from earlier productivity initiatives under our Cost and Simplicity agenda and the write-down of the value of our grass seed inventory in fiscal 2024.
Pet operating income increased $12.3 million, or 6.0%, to $215.7 million in fiscal 2025 from $203.4 million in fiscal 2024, due to an improved gross margin and decreased selling, general and administrative expenses partially offset by lower net sales. Pet operating margin increased from 11.1% in fiscal 2024 to 12.0% in fiscal 2025. On a non-GAAP basis, Pet operating income increased $1.9 million in fiscal 2025 as compared to fiscal 2024 and operating margin improved to 12.5% in fiscal 2025 from 12.2% in fiscal 2024.
Garden operating income improved $60.5 million, or 73.9%, to $142.4 million in fiscal 2025 from $81.9 million in fiscal 2024, due to a $45.3 million increase in gross profit and a $15.2 million decrease in selling, general and administrative expense partially offset by a $40.6 million decrease in net sales. Garden operating margin improved to 10.7% in fiscal 2025 from 6.0% in fiscal 2024. On a non-GAAP basis, excluding the charges in fiscal 2025 and 2024 related to facility closures, Garden operating income improved $45.2 million and non-GAAP operating margin improved to 11.1% in fiscal 2025 from 7.5% in fiscal 2024.
Corporate expenses increased $8.1 million due primarily to increased variable compensation expense, increased marketing investment and the nonrecurrence of a gain from a litigation settlement in fiscal 2024.
Net interest expense decreased $5.1 million, or 13.4%, from $37.9 million in fiscal 2024 to $32.8 million in fiscal 2025. The decrease in net interest expense was due to increased interest income resulting from higher cash balances during fiscal 2025.
Debt outstanding on September 27, 2025 and September 28, 2024 was $1.2 billion. Our average borrowing rate was 4.5% in both fiscal 2025 and fiscal 2024.
Other income (expense) is comprised of income or loss from investments accounted for under the equity method of accounting and foreign currency exchange gains and losses. Other income (expense) was an expense of $0.5 million in fiscal 2025 compared to $5.1 million in fiscal 2024. The decrease in expense was due primarily to a $7.5 million non-cash impairment in fiscal 2024 for two private company investments.
Our effective income tax rate was 24.4% for fiscal 2025 compared to 23.2% for fiscal 2024. The increase in our effective income tax rate was due primarily to the non-deductibility for tax purposes of losses incurred in connection with the wind-down of our U.K. operations.
Our net income for fiscal 2025 was $162.8 million, or $2.55 per diluted share, compared to $108.0 million, or $1.62 per diluted share, for fiscal 2024. On a non-GAAP basis, net income in fiscal 2025 was $174.2 million, or $2.73 per diluted share, compared to $142.4 million, or $2.13 per diluted share, for fiscal 2024.
Net sales for fiscal 2024 decreased $109.6 million, or 3.3%, to $3,200.5 million from $3,310.1 million in fiscal 2023. Fiscal 2024 included 52 weeks while fiscal 2023 included 53 weeks. Our branded product sales, which include products we produce under Central brand names and products we produce under third-party brands, decreased $80.2 million, and sales of other manufacturers’ products decreased $29.4 million. Sales of branded products represented approximately 78% of our net sales in both fiscal 2024 and fiscal 2023, and sales of other manufacturers' products represented 22% of our net sales.
Organic net sales, which exclude net sales from the acquisition of TDBBS in November 2023 and net sales from the independent garden channel distribution business we sold in the prior fiscal year, declined $127.9 million, or 3.9%, as compared to the prior fiscal year. The decline in organic net sales was due primarily to lower Pet sales.
Pet net sales decreased $44.4 million, or 2.4%, to $1,832.8 million in fiscal 2024 from $1,877.2 million in fiscal 2023. Pet organic sales, which exclude net sales from the acquisition of TDBBS in November 2023, declined $110.8 million. Fiscal 2023 included an extra week compared to fiscal 2024. The decline in Pet net sales was volume-related and due primarily to lower demand for durable pet products, particularly in our outdoor cushion business, aquatics business, and pet bed business. These declines were partially offset by increased sales in our animal health business. Pet branded sales decreased $45.4 million, and sales of other manufacturers' products increased $1.0 million.
Garden net sales decreased $65.2 million, or 4.5%, to $1,367.7 million in fiscal 2024 from $1,432.9 million in fiscal 2023. Garden organic sales, which exclude net sales from the independent garden channel distribution business sold in the fourth quarter of fiscal 2023, decreased $17.1 million, or 1.2%. The Garden net sales decline was volume related and due primarily to lower sales in wild bird feed partially offset by increased sales in our controls and grass seed businesses. Additionally, fiscal 2023 included an extra week compared to fiscal 2024. Garden branded sales decreased $34.8 million, and sales of other manufacturers' products decreased $30.4 million.
Gross profit in fiscal 2024 decreased $3.1 million, or 0.3%, to $943.7 million from $946.8 million in fiscal 2023. Gross margin improved 90 basis points to 29.5% in fiscal 2024 from 28.6% in fiscal 2023. The decline in gross profit resulted from decreased Garden gross profit, partially offset by an increase in Pet. The improved gross margin was due primarily to the higher gross margin in Pet partially offset by a lower gross margin in Garden. Both segments were adversely impacted by fiscal 2024 facility closure projects under our Cost and Simplicity initiative.
On a non-GAAP basis, excluding the charges associated with the facility closures in fiscal 2024, gross profit increased $3.5 million and gross margin improved 110 basis points to 30.0% in fiscal 2024. These increases were due primarily to the benefits resulting from Central's Cost and Simplicity program and lower inflation.
Both Pet and Garden benefitted from the results of the Cost and Simplicity program and lower inflation. The increase in the Pet gross margin was partially offset by a lower gross margin, as compared to the prior fiscal year. The decrease in Garden was due primarily to an approximately $19 million write-down of the value of our grass seed inventory due to a recent significant decrease in the market prices of grass seed and what we believe to be an industry-wide over supply of grass seed and lower sell through in our Live Goods business.
Selling, general and administrative expenses increased $22.1 million, or 3.0%, from $736.2 million in fiscal 2023 to $758.3 million in fiscal 2024. As a percentage of net sales, selling, general and administrative expenses increased from 22.2% in fiscal 2023 to 23.7% in fiscal 2024. The increase was due to $21.1 million in expense related to the closure of facilities in both the Pet and Garden segments and intangible asset impairments, partially offset by the gain from a litigation settlement. Excluding these items and similar items in fiscal 2023, non-GAAP selling, general and administrative expense increased $7.9 million and increased as a percentage of net sales to 23.0% in fiscal 2024 compared from 22.0% in fiscal year 2023.
Selling and delivery expense increased $2.3 million, or 0.7%, to $339.8 million in fiscal 2024 and increased as a percentage of net sales from 10.2% in fiscal 2023 to 10.6% in fiscal 2024. The increase in selling and delivery expense was in the Pet segment due primarily to our acquisition of TDBBS in November 2023.
Warehouse and administrative expense increased $19.8 million, or 5.0%, to $418.5 million in fiscal 2024 and increased as a percentage of net sales from 12.0% in fiscal 2023 to 13.1% in fiscal 2024. The increase in warehouse and administrative expense was due to increases in both the Pet and the Garden segments, partially offset by lower corporate expense. The increases in both the Pet and Garden segments were due primarily to the charges related to the closure of facilities, the exit of the pottery business and the impairment of intangible assets. Excluding these expense items, warehouse and administrative expense increased $8.9 million in fiscal 2024 as compared to fiscal 2023, due primarily to the acquisition of TDBBS in November 2023.
Corporate expense decreased due primarily to lower equity compensation and the gain from a litigation settlement. Corporate expenses included within administrative expense relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.
Operating income decreased $25.2 million, or 12.0%, to $185.4 million in fiscal 2024 from $210.6 million in fiscal 2023. Our operating margin was 5.8% in fiscal 2024, decreasing from 6.4% in fiscal 2023. Decreased sales of $109.6 million and increased selling, general and administrative expenses, partially offset by a 90 basis point increase in gross margin, contributed to the lower operating income. The increased selling, general administrative expenses were due primarily to facility closures and intangible asset impairments. Excluding the impact of these costs, on a non-GAAP basis, operating margin was 7.0% in fiscal 2024 compared to 6.9% in fiscal 2023.
Pet operating income increased $5.4 million, or 2.7%, to $203.4 million in fiscal 2024 from $198.0 million in fiscal 2023, due to an improved gross margin partially offset by lower net sales and increased selling, general and administrative expenses. Pet operating margin increased from 10.5% in fiscal 2023 to 11.1% in fiscal 2024. On a non-GAAP basis, Pet operating income increased $7.3 million in fiscal 2024 as compared to fiscal 2023 and operating margin improved to 12.2% in fiscal 2024 from 11.5% in fiscal 2023.
Garden operating income decreased $41.6 million, or 33.7%, to $81.9 million in fiscal 2024 from $123.5 million in fiscal 2023, due to lower sales, a lower gross margin, and higher selling, general and administrative expenses. Both gross margin and selling, general and administrative expenses were impacted by charges related to the closure of facilities and the planned exit of the pottery business. On a non-GAAP basis that excludes the impact of these charges in both fiscal 2024 and fiscal 2023, Garden non-GAAP operating income declined $19.4 million in fiscal 2024 as compared to fiscal 2023 and non-GAAP operating margin declined to 7.5% in fiscal 2024 from 8.5% in fiscal 2023 due primarily to a write-down of the value of our grass seed inventory due to a recent significant decrease in the market prices for grass seed and what we believe to be an industry-wide over supply of grass seed and lower sell through in our Live Plants business.
Corporate expenses decreased $10.9 million due primarily to lower equity compensation and the gain from a litigation settlement.
Net interest expense decreased $11.8 million, or 23.7%, from $49.7 million in fiscal 2023 to $37.9 million in fiscal 2024. The decrease in net interest expense was due to increased interest income due primarily to higher cash balances during fiscal 2024.
What changed in the latest 10-Q
Risk Factors
There have been no material changes from the risk factors previously disclosed in Item 1A to Part I of our Form 10-K for the fiscal year ended September 27, 2025.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Subsequent Event”
Largest changes
“•Tariff refunds: we have excluded the impact of tariff refunds received for certain tariffs previously imposed under the International Emergency Economic Powers Act which were deemed unconstitutional. We believe the tariff refund amounts we have received represent infrequent transactions that impact the comparability between operating periods.”see in full comparison
Net income in thesee in full comparisonsecondthird quarter of fiscal 2026 was$79.4$89.9 million, or$1.28$1.45 per diluted share, compared to$63.6$95.0 million, or$0.98$1.52 per diluted share, in thesecondthird quarter of fiscal 2025. On a non-GAAP basis, which excludes the impact of charges related to facility closures, business exits and tariff refunds received, net income in thesecondthird quarter of fiscal 2026 was$79.6$95.6 million, or$1.29$1.54 per diluted share, compared to$67.7$97.9 million, or$1.04$1.56 per diluted share, in thesecondthird quarter of fiscal 2025.
Warehouse and administrative expensesee in full comparisonincreaseddecreased$0.3$3.4 million, to$98.4$99.5 million for the three months endedMarchJune28,27, 2026 from$98.1$102.9 million for the three months endedMarchJune29,28, 2025.IncreasedBothcorporatePet and Garden had lower warehouse and administrative expensewaspartially offset byaandecreaseincrease in corporate expense. Pet warehouse and administrativeexpense.expense decreased due to the divestiture of the pet distribution business while Garden had lower expense due primarily to lower facility closure charges in the current year quarter and lower variable compensation amounts. Corporate expenses increased$3.8$7.0 million due primarily to higher third-party provider expense, driven by M&A activityexpenditures.expenditures and higher payroll costs related to our investment in data improvement and AI readiness. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.
Warehouse and administrative expense increasedsee in full comparison$5.5$2.1 million, or2.8%,0.7%, to$198.6$298.1 million for thesixnine months endedMarchJune28,27, 2026 from$193.1$296.0 million for thesixnine months endedMarchJune29,28, 2025. Increased expense in both Garden and corporate was partially offset by a decrease in Pet. The increase in Garden was due primarily to$7.8 million inhigher facility closure costs incurred in thefirstninequartermonths of fiscal2026,2026 as compared to the nine months in fiscal 2025, while the decrease in Pet was due primarily to thebenefitsdivestitureobtainedoffromthepriorpetyeardistributionfacility closures.business. Corporate expenses increased$1.7$8.7 million due primarily to higher third-party provider expense driven by M&A activityexpenditures.expenditures and payroll related costs, including variable compensation and our investment in data improvement and AI readiness. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.
“2.During the third quarter of fiscal 2026, we recognized incremental income in our Pet segment of $3.6 million for tariff refunds received.”see in full comparison
Full comparison: every changed paragraph (86)
Fiscal 2026 SecondThird Quarter Financial Performance:
•Net sales increaseddecreased $73$79 million, or 9%,8%, from the prior year quarter to $906$882 million, withdue to the exit of the Pet Distribution business, while organic net sales increasingincreased 5% and Garden net sales increasing 13%.2.4%.
•Gross profit increaseddecreased $26$15 million from the prior year quarter, while gross margin increased 30130 basis points to 33.1%.35.9%.
•Selling, general and administrative expense increaseddecreased $6 million from the prior year quarter to $186$191 million and decreasedincreased as a percentage of net sales to 20.5%.21.7%. On a non-GAAP basis, selling, general and administrative expense decreased $11 million and increased as a percentage of net sales to 20.6%.
•Operating income increaseddeclined $21$9 million from the prior year quarter to $114$126 million and our operating margin improved to 14.3% in the secondthird quarter of fiscal 2026. On a non-GAAP basis, operating income declined $3 million and operating margin improved to 15.4% from the prior year quarter.
•Net income in the secondthird quarter of fiscal 2026 was $79$90 million, or $1.28$1.45 per diluted share, compared to $64$95 million, or $0.98$1.52 per diluted share. On a non-GAAP basis, net income in the third quarter of fiscal 2026 was $96 million, or $1.54 per diluted share, orcompared $68to $98 million, or $1.04$1.56 per diluted share onin athe non-GAAPthird basis.quarter of fiscal 2025.
On April 13, 2026, we entered into a strategic partnership with Phillips Pet Food & Supplies,Supplies ("Phillips"), a leading national distributor of pet products, to form a new pet distribution business. The new business will operate under the Phillips brand as an independent entity focused on scaling a differentiated, high-performance nationwide distribution platform.
Under the terms of the agreement, we contributed our pet distribution businessbusiness, comprised of net assets of approximately $57 million, including inventory of approximately $69 million, into the newly formed entityentity. andWe received cash proceeds of approximately $31 million, a note receivable of approximately $5 million and a 20% ownership stakeinterest in the entity.newly formed partnership valued at $26 million. Phillips and its existing investors will hold the remaining 80%, with the new business operating as an independent entity focused on scaling a differentiated, high-performance nationwide distribution platform. The new business will operate under the Phillips brand.80%.
As a result of the transaction, we recognized a pre-tax gain of $2.5 million during the quarter ended June 27, 2026, which is included in Other income. Pet Distribution's net sales in fiscal 2025 were $474 million.
Subsequent Event
On July 27, 2026, we announced we entered into a Sale and Purchase Agreement (the “Purchase Agreement”) to acquire 80% of the outstanding shares of TRIXIE Heimtierbedarf GmbH & Co. KG, a German limited partnership (“TRIXIE”) together with certain related entities. TRIXIE is the leading European pet supplies and pet snacks company and headquartered in Tarp, Germany. The acquisition strengthens our portfolio of pet and garden brands and represents a major step in expanding our presence in Europe.
Under the terms of the Purchase Agreement, the Company will pay a total consideration of up to €400 million, with an upfront consideration of approximately €340 million paid in cash at closing and an earn-out potential of up to €60.0 million based on 2026 performance, each subject to certain adjustments. Certain shareholders of TRIXIE will retain approximately 20% of the shares of TRIXIE (the “Continuing Shareholders”). At future dates over at least three years, the Continuing Shareholders will have the right to require the Company to purchase their shares, and, if those rights are not exercised after three years, the Company will have a corresponding right to purchase those shares from the Continuing Shareholders.
The consummation of the Company’s acquisition of TRIXIE is subject to regulatory approval and other customary closing conditions. The acquisition is expected to close in the first half of the Company’s fiscal year ending September 25, 2027.
The combination of the pet industry distribution businesses will allow for a more efficient distribution network with increased scale and a focused management team. At the same time, we will benefit from a more focused portfolio and reduced operational complexity.
Three Months Ended MarchJune 28,27, 2026
Compared with Three Months Ended MarchJune 29,28, 2025
Net sales for the three months ended MarchJune 28,27, 2026, increaseddecreased $72.6$78.5 million, or 8.7%,8.2%, to $906.1$882.4 million from $833.5$960.9 million for the three months ended MarchJune 29,28, 2025. NetOrganic net sales increasedfor the quarter ended June 27, 2026, which excludes the impact of the divestiture of the pet distribution business divested in bothApril segments2026, the closure of our operations in the United Kingdom during fiscal 2025 and was primarily volume-based. The increase was due primarily to the timingacquisition of shipments,Champion within certainDecember volumes2025, shiftingincreased into our second fiscal quarter,2.4% from the firstprior quarter,year and the benefit of new listings and products.quarter. Our branded product sales increased $75.4$19.0 million, and sales of other manufacturers’ products decreased $2.8$97.5 million.
Pet net sales increaseddecreased $23.1$92 million, or 5.1%,18.7%, to $476.8$400.5 million for the three months ended MarchJune 28,27, 2026, from $453.7$492.5 million for the three months ended MarchJune 29,28, 2025. The increasedecrease in Pet net sales was due primarily to increased sales in our Dog & Cat business, primarily treats & toys, and increased sales in our outdoor cushion business due to the timingdivestiture of shipments,our withpet certaindistribution volumesbusiness shiftingin intoApril 2026. Pet organic net sales for the secondquarter quarterended June 27, 2026, which excludes the impact of the pet distribution business divested in April 2026, the closure of our operations in the United Kingdom during fiscal 2025 and the acquisition of Champion in December 2025, increased 1.7% from the firstprior year quarter. Pet branded product sales increaseddecreased $29.1$2.8 million, and sales of other manufacturers' products decreased $6.0$89.2 million.
Garden net sales increased $49.5$13.5 million, or 13.0%,2.9%, to $429.3$481.9 million for the three months ended MarchJune 28,27, 2026, from $379.8$468.4 million for the three months ended MarchJune 29,28, 2025. The increase in Garden net sales was due primarily to increased sales in ourwild bird feed, controls and grass seed businesses, bothprimarily benefittingvolume-based increases from aincreased favorable timing of shipments that shifted from the first quarter into the second quarter, and to new private label business and newretailer listings. These increases were partially offset by lower sales inof ourthird-party packetproducts, seeddue andprimarily liveto plantsthe businesses.distribution loss of a product line. Garden branded product sales increased $46.3$21.8 million, and sales of other manufacturers' products increaseddecreased $3.2$8.3 million.
Gross profit for the three months ended MarchJune 28,27, 2026 increaseddecreased $26.5$15.1 million, or 9.7%,4.5%, to $299.6$316.9 million from $273.1$332.0 million for the three months ended MarchJune 29,28, 2025. Gross margin increased 30130 basis points to 33.1%35.9% for the three months ended MarchJune 28,27, 2026 from 32.8%34.6% for the three months ended MarchJune 29,28, 2025. Gross profit decreased in Pet by $22.4 million partially offset by an increase in Garden of $7.3 million while gross margin increased in both segments. The increasedecrease in gross profit was drivendue byprimarily to the increasedivestiture of our pet distribution business in sales.April The2026. increaseAt inthe same time, gross margin wasimproved impacteddue byprimarily facilityto closure costs incurred inboth the prior year quarter. Excluding thepositive impact of chargesthe fordivestiture facilityof closuresour pet distribution business, which had lower margins, and our cost and simplicity initiatives in theboth second quarter of fiscal 2025, gross margin decreased 20 basis points from 33.3% for the three months ended March 29, 2025 to 33.1% for the three months ended March 28, 2026.segments.
In Pet, both gross profit and gross margin improved, favorably impacted by the increase in net sales, an improved product mix and productivity improvements. In Garden, gross profit increased due the increase in net sales while gross margin declined due primarily to higher manufacturing costs and a mix shift to private label sales.
Selling, general and administrative expenses increaseddecreased $5.9$5.8 million, or 3.3%,3.0%, to $185.6$191.1 million for the three months ended MarchJune 28,27, 2026. As a percentage of net sales, selling, general and administrative expenses decreasedincreased to 20.5%21.7% for the three months ended MarchJune 28,27, 2026, compared to 21.6%20.5% in the comparable prior year quarter. Selling, general and administrative expenses increaseddecreased in the Pet segment partially offset by an increase at corporate. Excluding the facility closure costs and business exit costs in both corporatequarters, non-GAAP selling, general and Garden,administrative whileexpense Petdecreased $11.1 million, and selling, general and administrative expense as a percentage of net sales was relatively flat20.6% as compared to 20.1% in the prior year quarter.
Selling and delivery expense increaseddecreased $5.5$2.4 million to $87.2$91.6 million for the three months ended MarchJune 28,27, 2026 as compared to $81.7$94.0 million in the prior year quarter. Pet segment selling and delivery expense decreased due to the divestiture of the pet distribution business. The decrease in Pet was partially offset by increased expense in both Pet and Garden was due primarily to incrementalincreased marketingadvertising expenses.and increased delivery costs due to the higher sales volume and fuel surcharges.
Warehouse and administrative expense increaseddecreased $0.3$3.4 million, to $98.4$99.5 million for the three months ended MarchJune 28,27, 2026 from $98.1$102.9 million for the three months ended MarchJune 29,28, 2025. IncreasedBoth corporatePet and Garden had lower warehouse and administrative expense was partially offset by aan decreaseincrease in corporate expense. Pet warehouse and administrative expense.expense decreased due to the divestiture of the pet distribution business while Garden had lower expense due primarily to lower facility closure charges in the current year quarter and lower variable compensation amounts. Corporate expenses increased $3.8$7.0 million due primarily to higher third-party provider expense, driven by M&A activity expenditures.expenditures and higher payroll costs related to our investment in data improvement and AI readiness. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.
Operating income increaseddecreased $20.6$9.3 million, or 22.1%,6.9%, to $113.9$125.8 million for the three months ended MarchJune 28,27, 2026 from $93.3$135.1 million for the three months ended MarchJune 29,28, 2025. Our operating margin improved from 11.2%14.1% in the prior year quarter to 12.6%14.3% in the current year quarter. The increasedecrease in operating income was due to a $72.6$78.5 million increasedecrease in net sales andpartially offset by a 30130 basis point increase in gross margin,margin partially offset byand a $5.9$5.8 million increasedecrease in selling, general and administrative expense. Non-GAAP operating income decreased $3.0 million, or 2.2%, to $136.0 million for the three months ended June 27, 2026 from $139.0 million for the three months ended June 28, 2025. Our non-GAAP operating margin improved to 15.4% from 14.5% in the prior year quarter. The decrease in non-GAAP operating income was due to a $77.2 million decrease in net sales partially offset by a 140 basis point increase in gross margin and an $11.1 million decrease in selling, general and administrative expense.
Pet operating income increaseddecreased $17.2$9.4 million, or 28.4%,12.3%, to $77.8$66.8 million for the three months ended MarchJune 28,27, 2026 from $60.6$76.2 million for the three months ended MarchJune 29,28, 2025. Pet operating income increaseddecreased due to a $23.1$92.0 million increasedecrease in net sales, partially offset by an improved gross margin and relatively flatlower selling, general and administrative expenses. Pet non-GAAP operating margin improved to 19.0% from 15.8% in the prior year quarter. The decrease in non-GAAP operating income was due to a $90.7 million decrease in net sales partially offset by a 330-basis point increase in gross margin and a $19.5 million decrease in selling, general and administrative expense, all of which were primarily impacted by the divestiture of the pet distribution business.
Garden operating income increased $7.1 million to $90.1 million for the three months ended June 27, 2026 from $83.0 million for the three months ended June 28, 2025. Garden operating income increased due to an increase in net sales of $13.5 million, a higher gross margin and a relatively flat selling, general and administrative expense. Garden non-GAAP operating income increased $5.6 million to $90.8 million for the three months ended June 27, 2026 from $85.2 million for the three months ended June 28, 2025. Garden non-GAAP operating income increased due to an increase in net sales of $13.5 million and a 60-basis point increase in gross margin partially offset by higher selling, general and administrative expense.
Garden operating income increased $7.2 million to $66.0 million for the three months ended March 28, 2026 from $58.7 million for the three months ended March 29, 2025. Garden operating income increased due to an increase in net sales of $49.5 million partially offset by a lower gross margin and higher selling, general and administrative expense.
Corporate operating expense increased $3.8$7.0 million, or 14.7%,28.9%, to $29.9$31.0 million for the three months ended MarchJune 28,27, 2026, due primarily to higher third partythird-party provider expenditures.expenses, driven by M&A activity, expenditures, and higher payroll costs related to our investment in data improvement and AI readiness.
Net interest expense decreased $0.3$1.0 million, or 2.9%,12.2%, from $9.4$8.8 million for the quarter ended MarchJune 29,28, 2025, to $9.1$7.8 million for the quarter ended MarchJune 28,27, 2026. The decrease was due primarily to lowerhigher interest expenseincome partially offset byas a minorresult decreaseof inhigher interestcash income.balances during the quarter. Debt outstanding on MarchJune 28,27, 2026 and MarchJune 29,28, 2025 was $1.2 billion.
Other Income (Expense)
Other income is comprised of income or losses from investments accounted for under the equity method of accounting and foreign currency exchange gains and losses. Other income (expense)increased decreased $1.1$0.4 million to an expenseincome of $0.4$1.5 million for the quarter ended MarchJune 28,27, 2026 as compared to income of $0.7$1.1 million in the prior quarter. The decreaseincrease in other income (expense) was due primarily to foreignthe currency lossesgain in the current year quarter as compared to foreign currency gains infrom the priordisposition yearof quarter.the pet distribution business partially offset by the earnings loss from the newly formed partnership.
Our effective income tax rate was 24.7% for the quarter ended June 27, 2026 as compared to 25.1% for the quarter ended June 28, 2025. The decrease in our effective income tax rate was due primarily to the non-deductibility for tax purposes of losses incurred in connection with the wind-down of our U.K. operations in the prior year quarter. This decrease was partially offset by an increase in the current quarter’s income tax rate from the current fiscal year’s second quarter rate due primarily to the tax impact of the contribution of our pet distribution business to the formation of a new partnership.
Our effective income tax rate was 23.5% for each of the quarters ended March 28, 2026, and March 29, 2025.
Net income in the secondthird quarter of fiscal 2026 was $79.4$89.9 million, or $1.28$1.45 per diluted share, compared to $63.6$95.0 million, or $0.98$1.52 per diluted share, in the secondthird quarter of fiscal 2025. On a non-GAAP basis, which excludes the impact of charges related to facility closures, business exits and tariff refunds received, net income in the secondthird quarter of fiscal 2026 was $79.6$95.6 million, or $1.29$1.54 per diluted share, compared to $67.7$97.9 million, or $1.04$1.56 per diluted share, in the secondthird quarter of fiscal 2025.
SixNine Months Ended MarchJune 28,27, 2026
Compared with SixNine Months Ended MarchJune 29,28, 2025
Net sales for the sixnine months ended MarchJune 28,27, 2026 increaseddecreased $33.5$45.0 million, or 2.3%,1.8%, to $1,523.5$2,405.9 million from $1,490.0$2,450.9 million for the sixnine months ended MarchJune 29,28, 2025. Our branded product sales increased $45.5$64.8 million, and sales of other manufacturers’ products decreased $12.0$109.8 million. Organic net sales for the nine months ended June 27, 2026, which excludes the impact of the pet distribution business divested in April 2026, the closure of our operations in the United Kingdom during fiscal 2025 and the acquisition of Champion in December 2025, increased 3.3% from the prior year nine-months ended June 28, 2025.
Pet net sales increased $11.4 million, or 1.3%, to $892.6 million for the six months ended March 28, 2026. The increase in Pet net sales was due primarily to higher sales in our Dog & Cat and Animal Health businesses, partially offset by lower sales of other manufacturers products and the sales in the prior year period from our operations in the United Kingdom that we closed in fiscal 2025. Pet branded sales increased $19.9 million, and sales of other manufacturers' products decreased $8.5 million.
GardenPet net sales increaseddecreased $22.1$80.6 million, or 3.6%,5.9%, to $630.9$1,293.1 million for the sixnine months ended MarchJune 27, 2026. The decrease in Pet net sales was due to our divestiture of our pet distribution business in April 2026. Pet organic net sales for the nine months ended June 27, 2026, increased 3.3% from the prior year nine months ended June 28, 2026.2025. The increase in GardenPet organic net sales was due primarily to increased sales in our controlsDog & Cat and grasswild seedbird businesses benefitting from new private label business and new listings. These increases were partially offset by lower sales in our live plants and packet seedfeed businesses. GardenPet branded sales increased $25.6$16.9 million, and sales of other manufacturers’manufacturers' products decreased $3.5$97.5 million.
Garden net sales increased $35.6 million, or 3.3%, to $1,112.8 million for the nine months ended June 27, 2026. The increase in Garden net sales was due primarily to increased sales in our controls, wild bird feed and grass seed businesses benefitting from new private label business and new retailer listings. These increases were partially offset by lower sales of garden third-party products and live plants. Garden branded sales increased $47.9 million, and sales of other manufacturers’ products decreased $12.3 million.
Gross profit for the sixnine months ended MarchJune 28,27, 2026,2026 increased $21.4$6.3 million, or 4.6%,0.8%, to $490.2$807.1 million from $468.8$800.8 million for the sixnine months ended MarchJune 29,28, 2025. The increase in gross profit was due to a $12.9 million increase in Garden, partially offset by a $6.6 million decrease in Pet. Gross margin improved 7080 basis points to 32.2%33.5% for the sixnine months ended MarchJune 28,27, 2026, from 31.5%32.7% for the sixnine months ended MarchJune 29,28, 2025. The gross margin improvement was due primarily to a 180-basis point increase in Pet, with Garden also improving 20-basis points.
The decline in Pet gross profit was due primarily to the divestiture of the pet distribution business. The improvement in the Pet gross margin was due primarily to a positive mix shift from the divestiture of the pet distribution business, which had lower margins, and increased sales of higher margin products.
The improvements in Garden gross profit and gross margin were due primarily to grass seed, due to increased sales and favorable inventory costs, and wild bird feed, due to increased sales and additional volume leverage.
Both the Pet and Garden segments contributed to the improved gross profit, with Pet being the larger contributor. Gross margin increased in Pet while the Garden gross margin was relatively flat as compared to the prior year six month period. The increase in the Pet gross margin was driven primarily by productivity gains resulting from our Cost and Simplicity agenda and a mix shift in sales.
On a non-GAAP basis, which excludes the impact of charges for facility closures in the six months ended March 28, 2026 and March 29, 2025, gross profit increased $16.5 million and gross margin improved 30 basis points. The increase in gross margin was due primarily to the pet gross margin increase noted above.
Selling, general and administrative expenses increased $12.2$6.4 million, or 3.5%,1.2%, to $359.7$550.8 million for the sixnine months ended MarchJune 28,27, 2026 from $347.5$544.4 million for the sixnine months ended MarchJune 29,28, 2025. The increase in selling, general and administrative expenses was due to higher expenses in both Garden and corporate.corporate partially offset by lower expenses in Pet. As a percentage of net sales, selling, general and administrative expenses increased to 23.6%22.9% for the sixnine months ended MarchJune 28,27, 2026 from 23.3%22.2% for the prior year period. Excluding the facility closure costs and business exit costs in both nine-month periods, non-GAAP selling, general and administrative expense decreased $6.4 million and selling, general and administrative expense as a percentage of net sales was 22.2% as compared to 22.0% in the prior year nine-month period.
Selling and delivery expense increased $6.7$4.3 million, or 4.3%,1.7%, to $161.1$252.7 million for the sixnine months ended MarchJune 28,27, 2026 from $154.4$248.4 million for the sixnine months ended MarchJune 29,28, 2025. The increase in selling and delivery expense was due to higher marketing and advertising spend in both Pet and Garden.Garden partially offset by lower delivery expenses in Pet due to the pet distribution business divestiture.
Warehouse and administrative expense increased $5.5$2.1 million, or 2.8%,0.7%, to $198.6$298.1 million for the sixnine months ended MarchJune 28,27, 2026 from $193.1$296.0 million for the sixnine months ended MarchJune 29,28, 2025. Increased expense in both Garden and corporate was partially offset by a decrease in Pet. The increase in Garden was due primarily to $7.8 million inhigher facility closure costs incurred in the firstnine quartermonths of fiscal 2026,2026 as compared to the nine months in fiscal 2025, while the decrease in Pet was due primarily to the benefitsdivestiture obtainedof fromthe priorpet yeardistribution facility closures.business. Corporate expenses increased $1.7$8.7 million due primarily to higher third-party provider expense driven by M&A activity expenditures.expenditures and payroll related costs, including variable compensation and our investment in data improvement and AI readiness. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.
Operating income decreased $0.1 million, or 0.1%, to $256.3 million for the nine months ended June 27, 2026 from $256.4 million for the nine months ended June 28, 2025. Our operating margin increased to 10.7% for the nine months ended June 27, 2026 from 10.5% for the nine months ended June 28, 2025. Operating income was relatively flat with a $45 million decrease in net sales and a $6.4 million increase in selling, general and administrative expense partially offset by an 80-basis point gross margin improvement. Non-GAAP operating income increased $8.7 million, or 3.3%, to $274.4 million for the nine months ended June 27, 2026, from $265.7 million for the nine months ended June 28, 2025. Our non-GAAP operating margin improved to 11.4% from 10.8% in the prior year nine month period. The increase in non-GAAP operating income was due to a 70-basis point improvement in gross margin and a $6.4 million decrease in selling, general and administrative expense partially offset by a $43.6 million decrease in net sales.
Operating income increased $9.2 million, or 7.5%, to $130.5 million for the six months ended March 28, 2026 from $121.3 million for the six months ended March 29, 2025. Our operating margin increased to 8.6% for the six months ended March 28, 2026 from 8.1% for the six months ended March 29, 2025. Operating income increased due to a $33.5 million increase in net sales and a 70 basis point improvement in gross margin, partially offset by a $12.2 million increase in selling, general and administrative expense.
Pet operating income increased $15.8 million, or 14.1%, to $127.6 million for the six months ended March 28, 2026 from $111.9 million for the six months ended March 29, 2025. Pet operating income increased due to higher net sales and an improved gross margin.
GardenPet operating income decreasedincreased $4.9$6.4 millionmillion, or 3.4%, to $56.3$194.4 million for the sixnine months ended MarchJune 28,27, 2026 from $61.2$188.1 million for the sixnine months ended MarchJune 29,28, 2025. GardenPet operating income decreasedincreased due to increasedan improved gross margin and lower selling, general and administrative expenses partially offset by increaseda decrease in net salessales. Pet non-GAAP operating income improved $9.5 million and a relatively flat grossoperating margin asimproved to 15.8% compared to the prior year six-month period. On a non-GAAP basis, which excludes the facility charges incurred14.2% in the firstprior quarternine ofmonth fiscal 2026, Garden operating income increased $2.4 million.period.
Garden operating income increased $2.2 million to $146.3 million for the nine months ended June 27, 2026 from $144.1 million for the nine months ended June 28, 2025. Garden operating income increased due to increased net sales and an improved gross margin partially offset by increased selling, general and administrative expense. Garden non-GAAP operating income increased $8.0 million to $154.4 million for the nine months ended June 27, 2026 from $146.4 million for the nine months ended June 28, 2025.
Corporate operating expense increased $1.7$8.7 million to $53.4$84.5 million in the current sixnine months ended from $51.7$75.8 million in the comparable fiscal 2025 period due primarily to higher third-party provider expense driven by M&A activity expenditures.expenditures and payroll costs, including variable compensation and our investment in date improvement and AI readiness..
Net interest expense for the sixnine months ended MarchJune 28,27, 2026 decreased $0.2$1.3 million, or 1.4%,5.1%, to $16.9$24.6 million from $17.1$25.9 million for the sixnine months ended MarchJune 29,28, 2025. The decrease in net interest expense was due primarily to lowerhigher interest expenseincome partially offset byas a minorresult decreaseof inhigher interestcash income.balances. Debt outstanding on MarchJune 28,27, 2026 and MarchJune 29,28, 2025 was $1.2 billion.
Other Income (Expense)
Other income (expense) improved $0.8$1.2 million to an expenseincome of $0.2$1.3 million for the six-monthnine-month period ended MarchJune 28,27, 2026 as compared to an expenseincome of $1.0$0.1 million in the prior six-monthnine-month period. The decreaseincrease in other expenseincome was due primarily to lowerthe foreigngain currency losses infrom the currentdisposition six-month period as compared toof the priorpet yeardistribution six-monthbusiness period.partially offset by the earnings loss from the newly formed partnership.
Our effective income tax rate was 24.1% for the nine months ended June 27, 2026, as compared to 24.4% for the nine months ended June 28, 2025. The decrease in our effective income tax rate was due primarily to the non-deductibility for tax purposes of losses incurred in connection with the wind-down of our U.K. operations in the prior year. This decrease was partially offset by an increase in the current fiscal year's rate due primarily to the tax impact of the contribution of our pet distribution business to the formation of a new partnership.
Our effective income tax rate was 23.5% for both six-month periods ended March 28, 2026 compared to 23.5% and March 29, 2025.
CENT insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 2 filings (2 insiders, 3 trade dates, 13,900 shares, about $539.6K). Net open-market shares: -13,900 (purchases minus sales); net value about -$539.6K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-24 | Brown William E |
Other | 1,000 | — | — |
| 2026-08-13 | Brown William E |
Open-market sale | 3,900 | $39.00 | $152.1K |
| 2026-08-12 | Pennington Brooks Iii |
Gift | 5,800 | — | — |
| 2026-08-12 | Walker John D. Iii |
Open-market sale | 5,000 | $39.00 | $195.0K |
| 2026-08-11 | Walker John D. Iii |
Open-market sale | 5,000 | $38.50 | $192.5K |
| 2026-08-10 | Brown William E |
Option exercise | 127,942 | $31.18 | $4.0M |
| 2026-08-10 | Brown William E |
Shares withheld for tax | 116,232 | $38.28 | $4.4M |
| 2026-07-13 | Machek Howard |
Shares withheld for tax | 3,924 | $37.59 | $147.5K |
| 2026-06-24 | Hanson John Edward |
Option exercise | 8,518 | $35.22 | $300.0K |
| 2026-06-24 | Hanson John Edward |
Shares withheld for tax | 8,051 | $38.85 | $312.8K |
| 2026-06-15 | Walker John D. Iii |
Option exercise | 8,518 | $35.22 | $300.0K |
| 2026-06-15 | Walker John D. Iii |
Shares withheld for tax | 8,200 | $37.75 | $309.6K |
| 2026-06-03 | Brown William E |
Other | 11,586 | — | — |
| 2026-05-16 | Lahanas Nicholas |
Shares withheld for tax | 480 | $34.19 | $16.4K |
| 2025-08-18 | Brown William E |
Other | 8,531 | — | — |
Well-known investors holding CENT (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Two Sigma Investments | 2026-06-30 | 583,930 | $22.6M | 0.02% | Added 17% |
| Renaissance Technologies | 2026-06-30 | 321,756 | $12.5M | 0.02% | Reduced 29% |
| First Eagle Investment Management | 2026-06-30 | 289,938 | $11.2M | 0.02% | Added 11% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 277,458 | $10.8M | 0.0% | Added 3% |
| Renaissance Technologies | 2026-06-30 | 212,887 | $9.4M | 0.01% | Added 17% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 113,784 | $4.4M | 0.0% | Added 193% |
| D. E. Shaw & Co. | 2026-06-30 | 58,897 | $2.3M | 0.0% | Reduced 27% |
| Millennium Management (Israel Englander) | 2026-06-30 | 52,855 | $2.0M | 0.0% | Reduced 24% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 36,127 | $1.6M | 0.0% | Added 39% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 22,361 | $991.5K | 0.0% | Reduced 37% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 17,988 | $697.4K | 0.0% | Reduced 69% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 6,409 | $235.7K | — | Sold out |