Central Garden & Pet Company (NASDAQ:CENT.A) Q2 2018 Earnings Conference Call - Final Transcript

May 07, 2018 • 04:30 pm ET


Central Garden & Pet Company (NASDAQ:CENT.A) Q2 2018 Earnings Conference Call - Final Transcript


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George Roeth

are saying about our view for the full year.

We believe that we had superior organic growth in Q2 because we are clear on our strategies for both our segments and our execution has been strong. Specifically, our garden group continued to drive competitive advantage and execute with excellence with our retail partners. To start the current garden season, we gained distribution including the launch of our new Amdro Quick Kill mosquito line, increased share of our shelf behind existing items, both branded and private label, and secure the promotional display support to position Central for share gains when the season hits the stride.

We are sensitive to the fact that POS for the category is running behind a year ago due to poor weather and we are managing spending accordingly. More significantly, we continue to make progress against our long-term strategic efforts to enhance and leverage our lowest cost producer status. For example, in grass seed, we continue to make progress for improving our production efficiencies by bringing more of our seed enhancement process in-house.

In short, in Q2, we were pleased with our results against the variables that we control and the sales and profit figures reflect that success. What we can't control is weather and the timing of the breaking of the garden season across the country. We've seen strong consumption when the weather is favorable, which signals the demand is there. We're told by retailers that we continue to outperform the category. So, we're gaining share and are strengthening our competitive advantage and financial position. How POS plays out for the rest of the year will ultimately determine how much of the gain from Q2 we retain.

In the Pet segment, we grew strongly ahead of what we believe our categories are growing. Our organic strength and e-commerce club and mass including our store within a store concept for pet distribution business within the large grocery chain. We have also leveraged our increased capacity in our dog & cat business to introduce new private label chew products and a new line of products for the pet specialty channel are also growing distribution behind new items for our Cadet dog treat brand.

Similarly, leveraging the new capabilities on small animal bedding, we continue to expand the Kaytee Clean & Cozy line behind new features and are gaining share. In our DMC pet bedding business, we tested a new Sealy bed line directly with consumers with very positive response, which we will now expand with key customers. We continue to be focused on upgrading our products and innovating behind new items. We are receiving three innovation awards at the Global Pet Expo, the largest Pet Show in the U.S.

Finally, M&A is an important part of our growth strategy and financial algorithm. In the quarter, acquisitions added $9 million in revenue, including a full quarter of K&H and a small contribution from one of our newest purchases, Bell Nursery. Few things about Bell. This acquisition brings us into