Central Garden & Pet Company CENT reported soft third-quarter fiscal 2024 results, wherein both revenues and earnings declined year over year. The company faced challenges across its Pet and Garden segments, contributing to the decline. Net sales dipped 2.6% compared to the same period last year, and organic sales also dropped by 3%. These results reflect the impact of various operational and market headwinds, including inflationary pressures and shifts in consumer demand.

Closing yesterday’s session at $38.74, the stock has declined 3.7% since the announcement of the fiscal third-quarter results on Aug. 7 after the closing bell, reflecting investor concerns over the company’s muted performance. Looking at CENT’s past three-month performance, the stock has declined 7.4%. This decline is notably steeper compared to the broader market. Specifically, the industry has seen growth of 15.4%, while the S&P 500 has returned 2.6% during the same period.

Central Garden & Pet Company's stock is currently trading below its 50-day and 200-day moving averages, which is typically viewed as a bearish signal by technical analysts. This downward movement indicates sustained selling pressure and suggests that the stock may continue its declining trend, at least in the short term.

Reflecting the negative sentiment around Central Garden & Pet Company, the Zacks Consensus Estimate for earnings per share has seen a downward revision. Over the past 30 days, analysts have decreased their estimates for the current and next fiscal year by 5.4% to $2.11 and by 2.4% to $2.42 per share, respectively.

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Factors Derailing Central Garden & Pet’s Momentum

Central Garden & Pet Company is facing several challenges. Organic net Sales in the pet segment declined 2.2% in the third quarter of fiscal 2024. The durable pet products category has been hit hard, driven by reduced discretionary spending and softer pet adoption rates amid a tough macroeconomic environment. Despite growth in consumable pet products, the persistent pressure on durable goods suggests that Central Garden & Pet may struggle to maintain overall sales growth in the Pet segment.

The Garden segment performed worse than the Pet segment, with sales declining 6.1% and organic net sales down 3.7% in the fiscal third quarter. Adverse weather, like cold and wet conditions in April and May, followed by extreme heat in June, impacted the sell-through of live plants, a key category for Central Garden & Pet. Additionally, the sale of the independent garden channel distribution business, which accounted for about 5% of Garden segment sales, further weighed on performance.

The company reported lower foot traffic at its largest home center customers during the fiscal third quarter, compared to both the previous year and pre-COVID levels. The decreased traffic could result in slower product turnover, higher inventory levels and a greater need for discounting, negatively impacting profit margins. The ongoing shift in consumer behavior, driven by economic uncertainty, poses a risk to traditional sales channels and could lead to prolonged revenue pressure.

Central Garden & Pet continues to estimate fiscal 2024 adjusted earnings to be $2.00 per share despite anticipating a one-time charge of $15-20 million in the fiscal fourth quarter. The projection indicates uncertain consumer demand, shifting retailer dynamics, and ongoing macroeconomic and geopolitical challenges.

Central Garden & Pet Company currently carries a Zacks Rank #4 (Sell).