We delivered a record second quarter and a record first half with clear improvement across the board, higher sales, expanded operating margins, and stronger earnings per share versus last year. With that foundation in place, our focus is squarely on growth and disciplined capital allocation. Our diversified portfolio, operational flexibility, and disciplined approach to cost management and capital allocation position us well to deliver profitable growth as the macro backdrop continues to evolve. They are gaining traction, positioning us to drive both growth and margin expansion.

We're taking a disciplined, value-driven approach focused on high quality, margin accretive opportunities that strengthen our portfolio. On the joint venture, as expected, it will reduce reported revenue in the second half by a low-teens %, but with minimal impact on earnings, given the lower margin profile of that business. Based on our performance and outlook, we are maintaining our guidance for fiscal 2026 non-GAAP diluted EPS of $2.70 or better. As always, this guidance excludes the impact of future acquisitions, divestitures, or restructuring actions.

We've built a strong foundation, we're moving forward with focus, discipline, and a confidence in our ability to deliver long-term growth and value. Gross profit increased to $300 million from $273 million, with gross margin improving by 30 basis points to 33.1%. As a percentage of sales, SG&A was 20.5%, down from 21.6%, reflecting the improved sales leverage, prudent cost management, and ongoing simplification of the organization while continuing to reinvest in key growth initiatives. Operating income was $114 million compared with $93 million, and operating margin was 12.6% compared with 11.2%.

What went well
  • Central delivered a record second quarter and record first half, with net sales up 9% year-over-year to $906 million driven by growth across both segments.
  • Record Q2 diluted EPS of $1.28 exceeded both the prior year and expectations, and net income rose to $79 million from $64 million.
  • Operating income grew to $114 million from $93 million and operating margin expanded to 12.6% from 11.2%, with SG&A as a percentage of sales improving to 20.5% from 21.6%.
  • Pet segment operating margin improved sharply to 16.3% from 13.4% on sales leverage, mix, and portfolio optimization, with consumables up mid-single digits.
  • Garden segment net sales rose 13% to $425 million on shipment timing, low retailer inventories, and meaningful distribution gains in grass seed and fertilizer.
  • The company advanced simplification by forming a joint venture with Phillips Pet Food & Supplies (retaining a 20% stake) and consolidating TDBBS manufacturing into its New Jersey dog and cat platform.
What went wrong
  • Garden operating margin was relatively flat year-over-year as a lower-margin sales mix and higher manufacturing costs offset strong volume growth and productivity.
  • Garden adjusted EBITDA margin contracted to 17.7% from 18.2% on the lower-margin mix and higher manufacturing costs.
  • Other expense was $351,000 versus $744,000 of other income in the prior year, a year-over-year swing below operating income.
  • The Phillips JV is expected to reduce reported second-half revenue by a low-teens percentage and be $0.03 to $0.05 per share dilutive in the back half on initial losses and purchase accounting.

Guidance Changes

MetricPeriodCurrent guidance
Non-GAAP diluted EPSFY2026$2.70 or better (Maintained)
CapExFY2026Approximately $50 million to $60 million (Unchanged)
Phillips JV revenue impactH2 FY2026Reduces reported revenue by a low-teens percentage
Phillips JV earnings impactH2 FY2026Conservatively $0.03 to $0.05 per share dilutive

Performance Breakdown

MetricYoYNote
Net sales +9% to $906 million Growth across both segments and anticipated shift of shipments from Q1 into Q2
Gross margin +30 bps to 33.1% Productivity gains and favorable pet mix; prior year included a U.K. wind-down inventory charge
Operating income +$21 million to $114 million (margin 12.6% vs 11.2%) Sales leverage and ongoing simplification
Net income +$15 million to $79 million Higher operating income
Diluted EPS +$0.13 to $1.28 (record Q2) Strong execution and underlying business strength
Adjusted EBITDA +$16 million to $139 million (margin 15.4% vs 14.8%) Sales growth and margin improvement
Pet segment net sales +5% to $477 million Core consumables strength and expected cushion order shift from Q1 into Q2
Pet segment operating margin 16.3% vs 13.4% Sales leverage, mix improvement, portfolio optimization, and execution
Garden segment net sales +13% to $425 million Timing of initial retailer shipments, low retailer on-hand inventories, and distribution gains

Earnings Call Themes & Trends

TopicPrevious mentionCurrent periodTrend
Shipment timingSales slipped from Q1 into Q2Q2 captured the shifted shipments; first-half view smooths the noise (H1 sales +2%)Normalized
Pet category recoveryStabilized, near bottomFirst segment growth in several quarters; consumables up mid-single digits ex-distributionImproving
Simplification / distributionOwned full distribution businessFormed Phillips JV retaining 20%; exiting complexity to focus on branded portfolioStreamlining
Garden season / sell-throughCautiously optimistic going inStrong March and April consumption where weather favorable; May still pivotalImproving
Consumer behaviorValue-seekingStill value- and performance-seeking; channel shift to mass, club, e-commerce and private labelStable
M&A environmentSeveral discussions, picking upConversations more sincere, processes launching with quality assets, several active discussionsImproving

Q&A Summary

How is garden sell-through shaping up for the third quarter?
J.D. Walker and Jason Barnes said favorable March weather in southern markets drove strong consumption that carried into April across the broad portfolio, and with more points of sale year-over-year they are cautiously optimistic, though continued strength remains tied to weather.
Given the strong first half, how do you think about earnings growth in the second half against the $2.70-or-better guide?
Niko Lahanas said the start was strong and April ships look good, but the company needs to see the weather-dependent May garden season play out before raising guidance, typically doing so in early-to-mid June, and the wide $2.70-or-better aperture reflects that the momentum still needs to confirm.
Is pet growth continuing a reasonable expectation for the back half, and what drives it?
John Hanson said the company feels good after 5% pet top-line growth, the category has stabilized across household penetration, buy rate, and live animal sales, and even excluding the cushions timing benefit and distribution the organic growth is solid, though it is cautiously optimistic on the back half given flea and tick weather dependence.
What drove the Phillips distribution joint venture decision, and why is it earnings neutral rather than accretive in the back half?
Niko Lahanas cited investor questions about margins, the lower-margin overhang, and alignment with cost and simplicity given the business had 26,000 SKUs; Brad Smith said it was modestly profitable when sold, the 20% equity stake will carry initial losses and purchase accounting in the back half, making it conservatively $0.03 to $0.05 dilutive until synergies unlock.
What was the durables and consumables mix and how did durables perform?
Niko Lahanas said on a first-half basis durables were 18% of pet sales and expected to decline over time; durables were up quite a bit in Q2 largely due to the cushion shift, while John Hanson noted consumables were up mid-single digits and are the higher-margin focus area.
How has the M&A environment changed relative to three months and a year ago?
Niko Lahanas said activity has really picked up with more sincere conversations and deal flow, processes launching with quality assets, and several active discussions, contrasting with the more talk than action seen in 2025.

More on Central Garden & Pet Co

Reported 2026-05-06 · figures from the Central Garden & Pet Co Q2 2026 earnings call.

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