Central Garden & Pet (CENT) Strong on Digital Efforts & Buyouts
Central Garden & Pet Company CENT looks impressive, thanks to its robust business strategies. The company has been making constant efforts so far to reinforce its position in the pet supplies, and lawn and garden supplies space. It is also developing new products, advancing digital capabilities, optimizing supply chain and focusing on marketing activities. In addition, the company is steadily making smart buyouts to attain overall growth.
Let’s delve deeper.
Strategic Initiatives
Unique packaging, point-of-sale displays, logistic capabilities and a seamless customer service are some of its key catalysts. The company’s Central to Home strategy looks quite appealing. The company 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 judicious takeovers since 1992.
Through these consolidations, management has been enhancing its manufacturing capabilities, operating synergies, distribution network, economies of scale and market advantages to date. 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 space. 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 the net impact of the aforesaid three acquisitions to be accretive to the company’s fiscal 2021 earnings in the band of 11-16 cents a share.
Pet & Garden Units Doing Well
Both the company’s Garden and Pet divisions are performing well. The Garden unit is benefiting from the contributions of recent buyouts and solid organic growth with notable strength in the live plants, distribution and wild bird feed sections. The Pet division is seeing significant contributions from dog and cat, live animals, distribution and aquatics categories.
During third-quarter fiscal 2021, the Garden segment registered net sales growth of 42% while the Pet segment grew 10%. In the Pet segment, e-commerce accounted for 20% of the company’s pet-branded sales. Solid gains from the buyouts of DoMyOwn, Hopewell and Green Garden Products are continuously aiding the Garden unit.
Bottom Line
All the aforesaid strengths are likely to keep supporting Central Garden & Pet going forward. Apart from a diversified portfolio of brands, Central Garden & Pet has strong commercial relationships with Walmart WMT, Home Depot HD and Lowe’s LOW.
Management envisioned fiscal 2021 adjusted earnings of $2.62 per share or better, indicating growth from the prior expectation of $2.42 or above. The updated view implies the benefit of robust performance in the first three quarters of fiscal 2021, the likely investments in capacity expansion, brand building and e-commerce.
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