Central Garden & Pet's Q2 2025: Unpacking Contradictions in Sales, Costs, and Market Strategy

Durable sales performance and tariff impact, cost and simplicity program savings, pet consumer products market share and growth strategy, impact of tariffs and trade policy on M&A strategy, price strategy and margin expectations are the key contradictions discussed in Central Garden & Pet Company's latest 2025Q2 earnings call



Revenue and Sales Performance:
- Central Garden & Pet Company reported net sales of $834 million for Q2, down 7% year-on-year.
- The decline was attributed to the earlier timing of preseason orders and promotional events, unseasonably cold and wet weather, and the loss of two product lines in the Garden Distribution business.

Margin Improvement and Cost Management:
- The company achieved a gross margin expansion of 180 basis points to 32.8%, and non-GAAP operating income reached a record for the Pet segment.
- This was driven by the successful execution of the Cost and Simplicity program, which included SKU rationalization, supply chain optimization, and e-commerce expansion.

Tariff Impact and Strategic Adjustments:
- Central Garden & Pet faced increased tariff exposure, with about 13% of its import costs subject to tariffs, mainly in the Pet segment.
- The company is actively working on plans to mitigate the impact, including vendor concessions, country of origin changes, and SKU redesign, as well as considering pricing adjustments.

E-commerce Growth and Digital Capabilities:
- E-commerce sales performance remained strong, contributing 27% of pet sales, with an increase in digital capabilities and conversion rates.
- Central Garden & Pet upgraded its Eastern Pennsylvania distribution center to enhance DTC capabilities, shipping over 10,000 packages directly to consumers, and plans to consolidate older centers for greater efficiency.