Central Garden & Pet Swings to Narrower Q4 Loss as Sales Climb, Garden Segment Shines

Central Garden & Pet Company’s fourth-quarter fiscal 2025 results showed the company outperforming expectations on both earnings and revenue, capping off what management calls a record-breaking fiscal year. The key takeaway: margin expansion is working, and garden investments are starting to pay off.

The Numbers That Matter

The bottom line surprised positively. Central posted an adjusted loss of 9 cents per share versus the expected 20-cent loss, marking a significant improvement from last year’s 18-cent loss in the same quarter. On the revenue side, net sales hit $678.2 million, up 1% year-over-year and exceeding the consensus estimate of $666 million.

The profitability story gets stronger when you look under the hood. Gross profit climbed to $196.5 million from $169 million a year prior, with the gross margin expanding 380 basis points to 29%. This expansion came largely from the absence of last year’s grass seed inventory write-down and better operational efficiency. The company’s Cost and Simplicity program is clearly gaining traction, with adjusted gross margin hitting 29.1%, up 310 basis points.

Operating performance shifted dramatically into positive territory. The operating loss narrowed to $6.4 million from a $32.4 million loss previously, while adjusted EBITDA jumped to $25.7 million from $16.8 million—a 53% increase that signals underlying business momentum.

Where the Growth Is Coming From

The Garden segment emerged as the star performer, with net sales rising 7% to $250 million. Wild bird products, grass seed, and fertilizers led the charge, with particularly strong online momentum—garden investments in e-commerce delivery surged into double digits across all categories, pushing online penetration above 10% of segment sales for the first time. The adjusted operating loss flipped to a $1 million profit, a stunning turnaround from the $24.9 million loss a year ago.

The Pet segment tells a different story. Sales fell 2% to $428 million, pressured by the planned U.K. operations wind-down and intentional exit from lower-margin pet durables. However, there’s a bright spot: the company gained market share in consumables categories including dog chews, flea and tick products, and pet nutrition, with consumables now representing 84% of Pet segment sales—the highest proportion in company history. E-commerce accounts for 27% of Pet segment revenues.

Financial Position and What’s Ahead

The balance sheet remains solid. Central Garden ended Q4 with $882.5 million in cash against $1.19 billion in long-term debt, translating to a 2.8x gross leverage ratio—below the company’s 3-3.5x target band. Operating cash flow for fiscal 2025 totaled $332.5 million.

Looking forward to fiscal 2026, management is projecting adjusted earnings of at least $2.70 per share. The outlook assumes continued margin discipline, pricing actions, and productivity gains to navigate tariff and inflationary headwinds. Capital expenditure is expected in the $50-60 million range, with focus directed toward innovation, productivity, digital technology, and AI-driven data analytics. For Q1 fiscal 2026, the company guides to 10-15 cents per share earnings.

The retail environment remains promotional, but Central Garden’s two-pronged approach—protecting margins while growing market share in core consumables and executing strategic garden investments—positions the company to deliver against guidance. Investors should monitor whether the company can sustain this margin expansion while navigating the consumer spending backdrop.