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Analogy 1: The Scotts Miracle-Gro for your backyard and pets.

Analogy 2: Like J.M. Smucker, but instead of food and coffee, they make products for your garden and pets.

Analogy 3: A hybrid of Scotts Miracle-Gro for lawn and garden, and a major pet supply company like Mars Petcare.

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• Garden Products: Provides a comprehensive range of lawn and garden care items, including fertilizers, grass seeds, pest controls, and potting mixes.
• Pet Products: Offers a diverse portfolio of pet supplies, such as pet food, treats, litter, aquatics supplies, and health solutions for various animals.
• Wild Bird Feed: Supplies specialized feeds, seeds, and suet products catering to backyard wild bird enthusiasts.

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Major Customers of Central Garden & Pet (CENT)

Central Garden & Pet (CENT) operates primarily on a business-to-business (B2B) model, selling its branded and private label products for the lawn and garden and pet supplies markets to various retailers. These retailers then sell the products to individual consumers.

Based on their most recent annual report (10-K filing for the fiscal year ended September 30, 2023), the company has significant customer concentration and identified two major customers that accounted for 10% or more of its net sales:

• Walmart Inc. (Symbol: WMT): This major retailer accounted for approximately 19% of Central Garden & Pet's net sales in fiscal 2023. Sales to Walmart are primarily through CENT's Pet segment.
• The Home Depot, Inc. (Symbol: HD): This home improvement retailer accounted for approximately 11% of Central Garden & Pet's net sales in fiscal 2023. Sales to The Home Depot are primarily through CENT's Garden segment.

No other customer accounted for 10% or more of Central Garden & Pet's net sales in fiscal 2023.

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Niko Lahanas, Chief Executive Officer

Niko Lahanas became Chief Executive Officer of Central Garden & Pet in September 2024. He joined the company in 2006 and served as Chief Financial Officer from 2017 until his appointment as CEO. Throughout his tenure at Central, he held various finance roles, including Senior Vice President of Finance, Operations Management & Reporting, Chief Financial Officer of the Pet Segment, Vice President of Corporate Financial Planning & Analysis, and Director of Business Performance for the Garden segment. Before joining Central, Mr. Lahanas spent over eight years working in private equity and investment banking.

Brad Smith, Chief Financial Officer

Brad Smith was appointed Chief Financial Officer of Central Garden & Pet in September 2024. He joined Central in 2017 as Chief Financial Officer of the Pet Segment. Prior to Central, Mr. Smith spent 12 years at Delhaize Group (now Ahold Delhaize), where he held progressively responsible finance positions, including Chief Financial Officer of their European operations. Earlier in his career, he worked for 11 years at Arthur Andersen.

Glen Axelrod, Senior Vice President, Dog & Cat

Glen Axelrod serves as Senior Vice President of the Dog & Cat division, overseeing brands such as TFH, Nylabone, Four Paws, IMS, and TDBBS. He is a member of the founding family of TFH, which was established in 1952 and acquired by Central Garden & Pet in 1997. Mr. Axelrod was instrumental in Central's acquisition of IMS and its subsequent integration into the Dog & Cat Brands portfolio.

John Hanson, President, Pet Consumer Products

John Hanson became President of Pet Consumer Products in August 2019, having previously served as a Board member since 2018. Before joining Central Garden & Pet, he provided strategic and operational consulting services, including for mergers and acquisitions within the consumer-packaged goods industry. He also held several leadership roles at ConAgra, including President of its Frozen Foods Division, where he achieved significant business growth both organically and through acquisition.

J.D. Walker, President, Garden Consumer Products

J.D. Walker is President of Garden Consumer Products, responsible for Central's branded garden business, encompassing sales, service, marketing, Controls, Grass Seed, Vendor Partner business units, and Garden Distribution. He brings over 36 years of experience in the consumer-packaged goods industry and more than 18 years in the lawn and garden industry. Before joining Central in 2011, Mr. Walker held increasingly senior positions at Spectrum Brands, Gillette, and Duracell.

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Key Risks to Central Garden & Pet (CENT)

1. Adverse Macroeconomic Conditions and Declining Consumer Demand: Central Garden & Pet faces significant risks from economic uncertainty, including potential recessions, inflationary pressures, and a general decline in consumer spending. These macroeconomic headwinds can lead to reduced demand for its pet and garden products, impacting net sales and profitability. Furthermore, adverse weather conditions directly affect the seasonal demand for garden products, exacerbating revenue volatility. The company has already experienced declining organic sales and downward-trending earnings per share, with both the Pet and Garden segments facing demand headwinds.
2. Inability to Drive Consistent Organic Growth and Profitability: The company has struggled with its core business, experiencing a decline in organic sales over recent quarters and a downward trend in earnings per share, indicating challenges in achieving profitable growth. Despite strategic initiatives like the "Central to Home" strategy and "Cost and Simplicity" program aimed at improving efficiency and margins, consistent top-line growth and significant financial improvement have not fully materialized. Risks associated with new product introductions, including the potential that new products will not generate sufficient sales to recoup investments, further compound this challenge.
3. Intense Competition and Retail Industry Consolidation: Central Garden & Pet operates in highly fragmented and competitive pet and garden industries. The competitive landscape includes numerous players, which can exert pressure on pricing and market share. Additionally, consolidation trends within the retail industry mean that the company is dependent on a small number of major customers for a significant portion of its business, posing a risk if these relationships deteriorate or if retailers exert increased bargaining power. This also includes potential credit risk associated with certain brick-and-mortar retailers.

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The emergence and rapid growth of direct-to-consumer (DTC) personalized and fresh pet food companies. These companies bypass traditional retail channels, offering fresh, human-grade, and often customized meals delivered directly to consumers. This model challenges Central Garden & Pet's established pet food brands and their reliance on traditional retail distribution, as it caters to a growing consumer demand for higher quality, personalized, and convenient pet nutrition.

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Central Garden & Pet (CENT) operates primarily in two main market segments: Pet Supplies and Lawn & Garden products, predominantly within the U.S. and North American regions.

Pet Supplies Market

The total U.S. pet industry is a significant market, with estimated sales reaching $150.6 billion in 2024 and projected to grow to $157 billion in 2025, and further to $250 billion by 2030. Central Garden & Pet focuses on specific categories within this larger market, including pet supplies, live fish, and small animals. The company estimates the annual retail sales for these particular markets to be approximately $39 billion. More broadly, the U.S. pet supplies market is projected to reach $36.6 billion in 2024. The "Supplies, Live Animals & OTC Medicine" segment of the U.S. pet industry is projected to reach $34.3 billion in 2025.

Lawn & Garden Products Market

The addressable market for Central Garden & Pet's lawn and garden products is substantial within the U.S. The overall U.S. lawn and garden market is expected to grow to $83 billion in 2025 and is projected to reach $102 billion by 2028. More specifically, the U.S. gardening market was valued at approximately $22 billion in 2024, with projections to reach $27.4 billion by 2030. For lawn and garden consumables, which include products such as seeds, fertilizers, and pesticides, the U.S. market was valued at $10.41 billion in 2023 and is projected to reach $11.76 billion by 2029. Another estimate places the U.S. lawn and garden consumables market size at $6.97 billion in 2024, expected to increase to about $12.75 billion by 2034.

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Central Garden & Pet (CENT) is expected to drive future revenue growth over the next 2-3 years through several key strategies:

1. Innovation and New Product Launches: The company is prioritizing sales growth through innovation and is investing in a robust pipeline of new products across its pet and garden segments. These launches are scheduled for fiscal 2025 and beyond, with a focus on meeting evolving consumer preferences, including high-quality pet consumables and sustainable garden solutions.
2. E-commerce Expansion and Digital Investments: Central Garden & Pet is heavily investing in digital infrastructure and enhancing its e-commerce capabilities. E-commerce penetration in the pet segment is projected to grow significantly, potentially rising from 27% to 40-50% of sales in the long term, while the garden segment has already seen double-digit e-commerce growth. This includes improved content, displays, videos, and new items to drive higher engagement and conversion rates.
3. Strategic Mergers & Acquisitions (M&A): The company anticipates an increase in M&A activity, particularly in 2026, with a strategic focus on acquiring high-growth, high-margin consumables businesses. This approach aims to expand its brand portfolio and bolster sales.
4. Premiumization and Product Mix Optimization: Central Garden & Pet is emphasizing premium, sustainable pet and garden products and is shifting its product mix toward higher-margin proprietary consumables. This strategy involves exiting lower-margin durable pet product lines and unprofitable business segments to improve overall profitability and focus on more lucrative offerings.

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• As of December 11, 2024, Central Garden & Pet's Board of Directors increased its stock repurchase authorization by an additional $100 million, bringing the total authorization to approximately $130 million.
• The company repurchased $9 million of its stock during the fourth quarter of fiscal 2024.
• During the first quarter of fiscal 2024, Central Garden & Pet repurchased 39,576 shares, or $1.4 million, of its stock.

• On December 11, 2023, a special stock dividend was declared, issuing one share of Class A Common Stock for every four outstanding shares of Common Stock, Class A Common Stock, and Class B Common Stock, with distribution expected on February 8, 2024.
• This stock dividend was projected to increase the outstanding shares of Class A Common Stock from approximately 41.1 million to approximately 54.6 million.
• In fiscal years 2023, 2022, and 2021, the company's 401(k) matching contributions in Class A common stock resulted in share issuances.

• In November 2023, Central Garden & Pet acquired TDBBS, LLC, a provider of premium natural dog chews and treats, to expand its portfolio and strengthen e-commerce and digital capabilities.
• The company acquired D&D Commodities in July 2021.
• Central Garden & Pet acquired Green Garden Products for $532 million and DoMyOwn in December 2020.

• Capital expenditures increased by 86.31% to $80.3 million in fiscal 2021 and by 43.46% to $115.2 million in fiscal 2022, primarily for capacity expansion and automation.
• Capital expenditures are anticipated to remain elevated compared to prior years due to the growth in the company's business following the Green Garden acquisition in early 2021.
• Central Garden & Pet expects its fiscal 2024 capital spending to be approximately $70 million, with a focus on enterprise resource planning software systems.