Sluggish 2Q for Central Garden - Analyst Blog
May 07 2012 - 3:45AM
Zacks
Central Garden & Pet
Company (CENT) recently reported sluggish second-quarter
2012 results. The company’s quarterly earnings of 45 cents a share
were down 16.7% from the prior-year quarter’s earnings of 54 cents
due to short-term execution issues on account of transformational
initiatives undertaken. The analyst covered by Zacks had expected
the company to deliver earnings of 54 cents per share in the
reported quarter.
Moreover, total revenue for the
quarter decreased 4% to $466.9 million, reflecting sales decline in
garden and pet products segment. Moreover, the company’s reported
net sales fell well short of the Zacks Consensus Estimate of $503
million.
During the reported quarter, gross
profit shrinked 9.5% to $147.7 million, whereas gross margin
contracted approximately 200 basis points to 31.6%. The decline
reflected a rise in raw material costs and lower sales of high
margin products. Operating profit for the quarter was $45.2
million, indicating a decline of 24.2% 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
declined 6% year over year to $244.4 million, reflecting lower
sales of grass seed and wild bird feed coupled with delay in
filling orders. The segment reported an operating profit of $36.6
million during the quarter, down 22% from the year-ago quarter.
According to the company, the
Garden Products segment’s branded product sales came in at $211.7
million, whereas sales of other manufacturers’ products came in at
$32.7 million during the quarter.
Pet Products segment sales inched
down 1% to $222.5 million, reflecting decreased sales of wild bird
feed. Moreover, the segment’s operating income decreased 10.3% year
over year to $21 million.
The segment’s branded product sales
came in at $179.8 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 $566.6 million and
shareholders’ equity of $448.8 million, excluding non-controlling
interest of $173,000. The leverage ratio was 5.5x for the quarter.
Capital expenditures for the quarter were $8 million. Management
expects capital expenditure of $30 million for fiscal 2012.
Currently, we maintain a long-term
‘Neutral’ recommendation on the stock. However, Central Garden
& Pet has a Zacks #4 Rank, which translates into a short-term
‘Sell’ rating.
CENTRAL GARDEN (CENT): Free Stock Analysis Report
SCOTTS MIRCL-GR (SMG): Free Stock Analysis Report
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