What Management Said
Read the full Q3 2026 transcript ↗Niko will begin by highlighting today's key takeaways, followed by Brad, who will walk through our financial performance and the acquisition of TRIXIE in greater detail. Organic sales grew, operating margins expanded, and our teams continued to execute well across the business. As utilization continues to increase, we're seeing meaningful improvements in productivity, service levels, and customer responsiveness. Project Horizon reflects the kind of disciplined operational execution that strengthens our competitive position while creating capacity to invest in growth.
Across Central, we're focused on making the business easier to operate, better serving our customers, and allocating capital to the highest return opportunities. We believe these investments will support sustainable growth while continuing to improve our returns over time. TRIXIE serves more than 30,000 pet retail stores worldwide with a portfolio that is approximately 90% branded products, a business built on strong customer relationships, differentiated products, and a long history of profitable growth. Approximately 10% of combined sales generated outside the United States and an attractive platform from which to participate in the continued growth and consolidation of the European pet specialty market.
We believe this transaction meaningfully enhances our long-term growth opportunities, and we're excited to welcome the TRIXIE team to the Central family. While the macroeconomic environment remains dynamic, our diversified portfolio, strong customer relationships, operational flexibility, and disciplined capital allocation position us well to continue delivering profitable growth. Consumers continue to seek value and performance, while eCommerce and, in certain categories, private label remain in important areas of growth. These investments are generating encouraging results today while positioning us to create sustainable growth and continued margin expansion over the long term.
What went well
- Organic net sales rose 2% to $862 million (excluding the exited pet distribution business), with growth in both Garden and Pet, and non-GAAP operating margin expanded 90 basis points to 15.4% (GAAP operating margin up 20 bps to 14.3%).
- Garden net sales grew 3% to $482 million on distribution wins and strong demand, with record fertilizer and Wild Bird sales, eCommerce up over 40%, and share gains in fertilizer, Wild Bird, and grass seed despite less-than-ideal weather.
- Pet organic sales grew 2% to $380 million, online sales rose 10% (aided by a record Prime Day), the professional business set another record, and Central gained share in professional, Dog Treats, Rawhide, and Flea & Tick.
- Operating cash flow was a company-record $327 million, cash reached nearly $997 million, and net leverage fell to an all-time-low 0.5x, marking the 14th consecutive quarter of year-over-year cash improvement.
- Central announced an agreement to acquire an 80% interest in TRIXIE, Europe's leading pet supplies and snacks company (serving 30,000+ retail stores, ~90% branded), for up to €400 million at a high-single-digit EBITA multiple, advancing its 'Central to Home' strategy.
- Project Horizon, the garden logistics modernization, is roughly 95% complete, delivered under budget, and the company raised its full-year non-GAAP diluted EPS outlook to $2.85 or better from $2.70 or better.
What went wrong
- Reported net sales fell 8% to $882 million due to the exit of the pet distribution business, and reported revenue will keep declining over the next several quarters as that exit annualizes.
- GAAP diluted EPS was $1.45, down from $1.52, and non-GAAP diluted EPS was $1.54, just shy of the prior year's $1.56.
- Non-GAAP operating income declined 2%, with higher corporate spend tied to the TRIXIE acquisition and data-capability investments accounting for more than 100% of the operating income decrease.
- The Pet segment's reported net sales fell 19% (distribution exit), and Dog & Cat revenue declined on promotional-event timing plus a South American plant fire that cost sales and margin (requiring airfreighted supply).
- Adjusted EBITDA slipped to $162 million from $167 million a year earlier, and consumers remain challenged, with some trade-down and a channel shift toward club/Walmart to monitor.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Full-year non-GAAP diluted EPS | FY2026 | $2.85 or better (raised) |
| TRIXIE acquisition close | First half FY2027 | Expected to close in H1 FY2027; ~10% of combined sales outside the U.S.; synergies expected beginning in year two |
| Long-term organic growth | Long-term | Pet 1%-4%, Garden ~1%-2%, plus M&A on top |
| Capital expenditures | FY2026 | ~$50 million (mostly maintenance plus targeted productivity/growth) |
| Leverage | Current | Gross leverage 2.8x, net leverage 0.5x (all-time low); TRIXIE funding not expected to meaningfully affect leverage |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Net sales | -8% to $882M (organic +2% to $862M) | Reported decline from the pet distribution exit; underlying organic growth in both Garden and Pet. |
| GAAP operating income | $126M (14.3% margin, +20 bps) | Margin expansion despite lower absolute income; distribution exit and productivity offset higher freight and TRIXIE/data spend. |
| GAAP diluted EPS | $1.45 (vs $1.52) | GAAP net income of $95 million, down 5%. |
| Non-GAAP operating income | $136M (15.4% margin, +90 bps) | Higher corporate spend on TRIXIE and data capabilities more than accounted for the 2% decline in operating income. |
| Adjusted EBITDA | $162M (18.3% margin, up from 17.3%) | Margin expansion on favorable mix and productivity despite lower absolute EBITDA. |
| Pet segment | Net sales $400M (-19%); organic +2% to $380M | Distribution exit reduced reported sales; broad organic gains offset lower Dog & Cat on promo timing and a plant fire; non-GAAP operating margin up 320 bps to 19%. |
| Garden segment | Net sales $482M (+3%) | Distribution wins and strong demand in fertilizer, Wild Bird, and grass seed; non-GAAP operating income up 7% to $91 million (18.9% margin). |
| Operating cash flow | Record $327M (vs $265M) | Strong cash conversion plus inventory unwind from the distribution exit and grass seed. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| TRIXIE and European M&A | Central to Home strategy | Agreed to acquire 80% of TRIXIE (Europe's leading pet supplies/snacks company) for up to €400 million; management sees synergies in manufacturing margin (shifting China-sourced Dog & Cat to Central plants), sourcing, and innovation, and views Europe as a fertile, lower-multiple M&A hunting ground. | — |
| Portfolio reshaping | Cost & Simplicity focus | Exit of the low-margin pet distribution business and the Phillips JV are removing 'noise' and sharpening focus on higher-margin businesses, reducing reported revenue but improving mix; reported revenue will keep declining near term. | — |
| Project Horizon / Cost & Simplicity | Multi-year logistics modernization | ~95% complete (13 facilities closed, two opened into a four-node Central Logistics Network), all projects under budget; next phase focuses on AI and robotics, with C&S now embedded in the culture. | — |
| Pet stabilization | Post-COVID trough | Management sees real stabilization with share gains in Rawhide, Dog Treats, Flea & Tick, and professional; small/live animal up low single digits; Dog & Cat softness attributed to promo timing (~two-thirds) and a one-time plant fire. | — |
| Garden execution | — | Delivered a record garden quarter despite mixed weather (cold/wet, then a heat dome, plus wildfire smoke), with brands up mid-to-high single digits; the heat dome bodes well for fall overseeding (grass seed) and fertilizer. | — |
| Consumer value-seeking | Trade-down pressure | Consumers are seeking a price-plus-quality-plus-performance 'value equation' rather than pure trade-down; branded outperformed private label in Pet this quarter, with value brands like Rebel grass seed and Bully Hide taking off, alongside a channel shift toward club/Walmart and eCommerce. | — |
Q&A Summary
Taylor Zick (KeyBanc) asked about underlying trends in the Pet segment given the many moving parts.
Niko Lahanas said Pet is stabilizing, with strong pro and equine, a good avian/small-animal quarter, and only a temporary Dog & Cat hiccup from a South American plant fire; John Hanson added household penetration and buy rate are stabilizing and Central is taking share in Rawhide, Dog Treats, Flea & Tick, and professional, aided by the Phillips JV simplifying the business.
Taylor Zick (KeyBanc) asked what Central saw on Garden amid industry weather concerns and how it informs Q4.
Jason Barnes described mixed weather (cold/wet then a heat dome) but brands up mid-to-high single digits, share gains in grass seed, fertilizer, and Wild Bird, strong eCommerce, and healthy (even net-negative) retailer inventories; J.D. Walker added the intense summer heat bodes well for fall overseeding and fertilizer.
Will Gildea (CJS Securities) asked about go-forward organic growth rates and potential TRIXIE margin synergies.
Lahanas targeted a return to long-term organic growth (Pet 1%-4%, Garden ~1%-2%) plus M&A, and outlined TRIXIE synergies from adding manufacturing margin on China-sourced Dog & Cat, better sourcing, and shared innovation; Brad Smith said synergies would begin in year two, not year one.
Brian McNamara (Canaccord) asked about Garden results drivers and quantifying the Pet plant-fire impact.
Jason Barnes said grass seed, fertilizer, and Wild Bird sell-through plus eCommerce drove Garden with inventories well positioned; Lahanas said the LatAm fire was unquantified but cost both sales and margin (airfreighted supply) as a one-time, non-systemic hit, and Smith noted about two-thirds of the Dog & Cat decline was normal promotional timing, with encouraging July results.
Jim Chartier (Monness, Crespi, Hardt) asked where Cost & Simplicity stands and about the M&A pipeline.
Lahanas said the big footprint moves are largely done with the next phase focused on AI/robotics and further pet-garden integration, and described a filling M&A pipeline with better valuation discipline; Smith called Europe a fertile, lower-multiple hunting ground for pet M&A.
Hale Holden (Barclays) asked whether TRIXIE integration would delay other deals and what drove the record cash flow.
Lahanas and Smith said TRIXIE has a separate work stream and does not preclude further deals (several are being pursued), with the only caution being thoughtful integration to avoid disrupting a great business; the record operating cash flow reflected strong conversion plus inventory unwind from the distribution exit and grass seed.
More on Central Garden & Pet Co
Reported 2026-08-05 · figures from the Central Garden & Pet Co Q3 2026 earnings call.
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