Central Garden & Pet (CENT) Solid on Buyouts & Digital Efforts


Central Garden & Pet Company (CENT Quick QuoteCENT ) seems in good shape, thanks to its robust business strategies that include prudent buyouts to fortify its presence. The company has been developing new products, advancing digital capabilities, optimizing its supply-chain efficiency and focusing on marketing activities.

Buyouts of DoMyOwn.com and Profitero are bolstering the company’s e-commerce arena. It focuses on expanding its pet supplies as well as the lawn and garden supplies to boost its portfolio. Both the company’s Pet and Garden segments have been showing strength for a while.

These endeavors have led this Walnut Creek, CA-firm’s shares to gain 16% so far this year against the industry’s 30.1% plunge. The Zacks Consensus Estimate for the company’s sales and earnings for fiscal 2021 is currently pegged at $3.29 billion and $2.75, respectively. The consensus estimates suggest an approximate jump of 22% for both metrics from the respective year-ago reported figures.

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Elaborating Strategies

Central Garden & Pet is looking forward to strengthening its position as one of the leading companies in the U.S. pet supplies, and lawn and garden supplies space. Unique packaging, point-of-sale displays, logistic capabilities and a seamless customer service are some of its key catalysts. The acquisition of DoMyOwn.com further advances the company’s digital abilities to deliver a strong omni-channel performance. Its partnership with the leading e-commerce platform Profitero also fortifies its e-commerce business with eight retail partners.

The company’s Central to Home strategy looks promising. This initiative involves a renewed focus on venture so that the company can come up with new products and capabilities. It is also looking forward to cash in on the growth opportunities to deliver impressive profits. In addition, it is making efforts to lower costs to improve margins and fuel growth. Management remains on track to double the company’s capital expenditures for fiscal 2021 from its historic levels with a major portion being allocated to enhancing its manufacturing capacity.

Acquisitions are integral to Central Garden & Pet’s strategy. The company has been a disciplined buyer in the garden and pet areas, and expanded its business via smart buyouts since 1992. Through these acquisitions, management has been enhancing its manufacturing capabilities, operating synergies, distribution network, economies of scale and market advantages. These integrations are widening the company’s customer base, helping it capture a greater market share and boost its overall profitability.

Over the years, the company has bought several new businesses including entering into the live plant and outdoor seat cushion businesses. It acquired the C&S Products in May 2019, which is complementing its existing wild bird feed business. Some of its notable buyouts include Hopewell Nursery, Green Garden Products and DoMyOwn.com. Management highlighted that estimates suggest that the net impact of the aforesaid three acquisitions will be accretive to the company’s fiscal 2021 earnings in the band of 11-16 cents a share.

Other Strengths

During third-quarter fiscal 2021, the Garden segment registered net sales growth of 42% while the Pet segment grew 10%. The Garden unit is benefiting from the contributions of recent buyouts and organic growth with notable strength in live plants, distribution and wild bird feed. The Pet division is seeing significant contributions from dog and cat, live animals, distribution and aquatics categories.

Overall, the fiscal third quarter was solid with both the top and the bottom line surpassing the Zacks Consensus Estimate and improving year over year. Robust performance in the first three quarters of fiscal 2021 prompted management to lift the earnings per share view for the fiscal year. Management envisioned fiscal 2021 GAAP earnings to be at or above $2.45 per share (or adjusted earnings of $2.62 or better) compared with the prior expectation of $2.25 or better (or adjusted earnings of $2.42 or above).

Contributions from the company’s major buyouts, likely investments in capacity expansion as well as brand-building and e-commerce efforts will continue aiding the company’s performance ahead. A VGM Score of A further justifies this currently Zacks Rank #2 (Buy) stock’s solid run on the bourses. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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