Central Garden & Pet Eyes Record Profits, European Expansion With TRIXIE Deal

Central Garden & Pet reported record profitability, including earnings, EBIT, EPS, cash flow and cash balances, supported by cost reductions, logistics consolidation and portfolio optimization. The company plans to acquire an 80% stake in European pet-supplies company TRIXIE, in a deal expected to close in January or February and potentially exceed $400 million. Management sees the transaction expanding its European and cat-product presence while creating a platform for further acquisitions. Central is simplifying its portfolio while investing in e-commerce, data infrastructure, artificial intelligence, logistics and robotics. Its diversified Garden business, including wild bird and seed products, helped offset weather volatility, while e-commerce represented 26% of Pet sales and 10% of Garden sales.

Central Garden & Pet NASDAQ: CENT executives said the company is entering a period of record profitability, expanding margins and increased acquisition activity as it simplifies its operating structure and pursues growth in pet and garden products. Speaking at Canaccord’s 46th Annual Growth Conference, Chief Executive Officer Niko Lahanas said the company’s year-to-date results included record earnings, EBIT, EPS, cash flow and cash balances. He said the Garden segment posted a record quarter and that the company’s fiscal third-quarter EPS was its second-highest ever, despite what he described as a difficult comparison period.

Lahanas also pointed to Central Garden & Pet’s pending acquisition of an 80% interest in European pet-supplies company TRIXIE, which he said is expected to close in January or February of next year. The transaction represents a major international expansion for the company, bringing foreign-exchange exposure as well as a presence in Europe.

Lahanas described TRIXIE as Europe’s largest pet-supplies business and said combining it with Central’s operations would create what he called the largest global pet-supplies business. He said the transaction offers a platform for further European consolidation, citing a fragmented market and lower acquisition multiples than those seen in the U.S.

The CEO said TRIXIE also increases Central’s exposure to cat products, an area where the company’s existing presence is limited. About 20% to 25% of TRIXIE’s business is related to cats, according to Lahanas. He said Central sees continued opportunity in cat products, citing cats’ lower-maintenance nature for consumers.

Central ended its fiscal third quarter with nearly $1 billion in cash and has not tapped its asset-based lending facility, giving it nearly $2 billion of available capital, Lahanas said. He estimated the TRIXIE transaction could total more than $400 million, assuming earn-out payments are achieved.

“Deals beget deals,” Lahanas said, adding that Central has received more inbound acquisition interest following the TRIXIE announcement. He said the company has completed more than 60 acquisitions over its 40-year history and considers M&A a core part of its strategy, particularly in mature categories where acquisitions can alter competitive positioning more quickly than organic growth alone.

Management attributed improving profitability in part to cost reductions, logistics consolidation and portfolio optimization. Lahanas said the company has focused on exiting or restructuring businesses where it lacks a “right to win” or where channel dynamics have ...