Central Garden & Pet (CENT) 25 Nov 242024 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to Central's Fourth Quarter Fiscal 2024 Earnings Call. My name is Julian, and I will be your conference operator for today. [Operator Instructions] As a reminder, this conference is being recorded.

to Investor call Relations. like Edelmann, to now President, Vice would turn over the Friederike I Please ahead. go

Thank you, Call. Julian, Central's Fourth and a warm and Year welcome, Fiscal XXXX Earnings Quarter everybody, to

Chief Speaking Nicholas new Financial Garden and John today Officer; Consumer Products; Brad President, Consumer Walker, Lahanas, new Chief Pet are Hanson, J.D. Smith, Executive Central's Products. our Officer; President,

Brad will a will John join us from then the our share more for cost In results simplicity year takeaways outlook. discuss for just segments more will fiscal and quarter, then key our And a the questions. financial for detail. your provide our outlook in J.D. moment, our and and Niko and program the and year X the

annual like share statements events all would what today. with materially subject to you the they we risk cause that are call Central differ range new the begin, forward-looking made this of We've in risks described otherwise. actual to forward-looking no subsequent and to information, to uncertainties these publicly from report reflect our could SEC. statements update filed or I that remind to undertakes obligation our during factors results Before

available Our GAAP discussed press on and at related this the non-GAAP ir.central.com. are release And the call. for includes materials reconciliation measures

prior growth all otherwise unless year, stated. the the comparisons in Lastly, made period during against this are same call

out to you me. the If hesitate please reach to after have more questions don't call,

with handing And to that, I'm over it Niko.

enter our advance I've privilege for leading and an our ever talented confident growth. and working honored had be CEO, path I'm to of Directors, you and company our phase CEO, more thank closely than truly of becoming of all we here as and joining with Board the us our exciting in afternoon, I'm leaders forward. today. Since Good team Central the

and strength includes a customer our We cost of foundation are on and experience, initiatives which innovation excellence. strategy of simplicity our Central and operational to consumer with Home focus from plans a operating our around

to you, been this I on over our Our goal and for XX and to investors. build Having foundation experience deep long-term of drive value understanding bring is business. with Central years, for our

CEO see opportunities fresh me However, to accelerate a sharpen focus, role clear areas growth. offers initiatives our and and I the our perspective, into stepping for future identify key

you Going eager into our provide stage forward, success. steps our and environment taking the future setting and performance current discuss with I'm vision navigate to for share to we're the the while insights

to Beth an Before we serve and go want thank Director. our I did exceptional Springer, job Lead who interim into CEO as as the messages, key to our Independent continue

me with I'd X start like take call. away themes you from the key this Let to

fiscal First, Despite challenges, we had tough 'XX. notable achievements solid a we environment. in results in delivered

simplicity and meaningful to fiscal program. and our made ourselves third, long-term we And success. cost positioning 'XX. streamlining on operations our progress for Next, We're looking ahead

While and the we're landscape we to sustainable strategy executing driving on remain growth. expect consumer focused competitive our and difficult,

these Now themes delve each more of let into in detail. me

X,XXX XX the together past achievements. operating their work and up of tough fiscal expansion, Central season, our and margin of the non-GAAP environment, garden we our EPS, These soft the customers. across our our a year including We're our 'XX particularly flow. demand what incredibly record businesses, of accomplished Despite delivered pet perseverance months. to continued drive employees growth team results first cash proud grit over gross strong and in a and durable facing following: rolled and who in Pet showcase segment another serve products profits to achievements Turning difficult sleeves pet

and resilience. for Central entire Thank you your the team dedication to

and Second, Simplicity progress on Cost program. our

logistics scale of portfolio multiyear efficiency optimization and procurement, Cost administrative manufacturing, better and a operations, simplify business to Our is the journey costs. and program leverage enhance across Simplicity our

cushion, some consolidation and our integrated initiatives of in and Arden improved me operations. and We shifting own provided production Let outdoor leased K&H fourth highlight costs further businesses, room with Carolina for our our from the and first Starting bed reduced in and California dog facilities to e-commerce the quarter. Indiana facilities North X shipping Arizona has of growth. closing capabilities

share. scaling allowing expanded dog natural in natural treats enhanced us dog larger Second, meet we to plant and at growing demand, capture our processing Mexico, our production. consumer To treats a capacity efficiency market

transportation. optimizing business a across transportation planning system most corporate delivery We centralized Third, reliability. of load management and reducing improving and rollout completed units, the costs

consolidated our for less social Central responsibility stewardship. profitable resources up environmental of are operations. modernized more our lean, our under production are name, and initiatives agile to finally, businesses to They moved strategic efficient. margin These growth output. and the make And more We for organic plant site better expansion to Bell and part streamlining Kentucky broader planning drive brand as to M&A in facilities our plants live as X and designed older, live well closed enhance and free effort and a

measurable our supply our are our environmental environment reduce working such, and provide operations sustainability chain, for As embedding latest goals a impact a secure in we safe resilient report outlined our employees. with into to impact ensure and

reflecting and giving Depot's need. in to participation to include also Foundation in commitment back events, Home our efforts those Recent community

outlook for move to our around fiscal message 'XX. let's third Now our key

ahead, to in steadfast remain Central commitment the to Home strategy. our Looking we

our of capabilities products garden ahead, portfolios and pipeline pet our the particularly making and fiscal in approach and agenda, Here's how capabilities, growth to investments our we're identifying a preparing across that new critical cost Maintaining a digital pursuing cash for with priorities, launches planned staying 'XX and portfolio, e-commerce, targeted for beyond. on focused and opportunities in our innovation. disciplined M&A align strengthen enhance and our advancing and year with strategic

by increasingly in promotion-driven the be we and retail and to external and foresee and value said, influenced discounts consumers significant by unique anticipate offers. prioritize a challenging uncertainties. sector headwinds strongly That on An brick-and-mortar We continued presenting marked having will marketplace challenges. geopolitical macroeconomic environment navigate promotional pressure who and competitive

profitable That to people even team we growth that, 'XX briefly already seasonal me XXXX to turning are we weather actions are an solidifying their guiding excites in the balance fiscal the garden new softer accomplished drive sales, driven unwavering even In a was and seems to that remain and extreme non-GAAP We continually to execute me year, margin with decisive and resilience. these ability let With sheet. beyond. line record-breaking proud my we non-GAAP consumption our volatility we fortress taking incredibly flow fiscal in Adding in before Furthermore, our $X.XX I'm remarks a in in have Brad. were demonstrating business. our changing said, strategy, of higher. successfully tough category this, EPS to our cash confident and to to But it normal. we our year. over exceptional achievements achieved EPS, and by be financial become a our delivered gross despite what growth what environment. greater and or summarize We an challenging expanded most

to CFO. with Smith, introduce you I'd Brad to And Central's new that, like

XX at our haven't in XXXX Pet met For Central worked Brad is years Chief of he what Ahold Central joined Brad those now Officer Financial segment. as you yet, Delhaize. to Prior of who

is the floor Brad, yours.

fiscal remarks, year. be you It's Thank a results. X% the of let here were all to with with Niko's our Net start you, Building compared $X.X to prior on decrease Niko, me 'XX and hello, today. everyone. great billion, sales

distribution profit impact efforts and and the $XXX driven As sales a inflation. throughout reminder, basis business. fiscal million of declined in the excluding year XXX our X%, for extra channel 'XX quarter. non-GAAP moderating margin TDBBS Organic week the gross year the Non-GAAP an of productivity and net compared from benefited points $XXX to expanded sale the the garden was fourth independent gross by by XX% and to million acquisition

SG&A Of X% was of fiscal above adjustments a discipline $XX business by volumes. our XX%, of percentage Cost SG&A basis Non-GAAP total, TDBBS, XXX related Simplicity were in to as lower of non-GAAP $XX response 'XX. $XXX cost addition prior across offset Non-GAAP initiatives. and and reflecting in that to million year increased points the million to sales partially the million

distribution Garden, the K&H will completed will of well of in as research business, completed and the by be announced the and X closure Within half which facility the closure will of manufacturing as Within facilities, year X calendar our wind Arden completed down end and calendar quarter included Pet, of X fourth end included this second be were this all which and and this be of 'XX. of fiscal X manufacturing 'XX. the in pottery by facility, which consolidation facilities of consolidation

changing to includes intangible K&H Simplicity market In charges, international addition increased assets of related and to the impairment the also to due the and quarter conditions Cost competition. fourth

operating cost of the settlement ago, related businesses, goods, in year in was to non-GAAP $X net X.X%. litigation. a on SG&A impairment recognized in for million with mostly partially million included COGS, and $XX Non-GAAP $XXX private we and $XX income to of equity expanded X expense. investments million $X operating million charges other Lastly, the noncash, the overall gain offset in from million million million $XXX by to in charge $XX X% was The compared margin of year

compared net income million the income. prior expense EPS $XXX was income Adjusted GAAP in $XXX to to compared $X.X compared -- compared guidance came and $X.XX. year. $X.X year the interest was million. non-GAAP $XX higher million million million. to interest $XXX EPS above expense was $XX Non-GAAP Below net by million line, interest $X.XX other at our $XXX driven for Non-GAAP was to million was and above EBITDA million

due year Our to rate state points an tax primarily basis XX increase income by rate. blended the in to tax the increased for XX.X%,

to consolidated for primarily versus extra million margin was from of decline gross quarter inventory net had Garden acquisition what in the benefits than to inflation Non-GAAP excluding grass the Garden quarter non-GAAP of and signaled efforts. in to we $XXX XX we and was were the seed compared prior million, by Organic sales to moderating call. XX% segment, TDBBS sales line in last charge and offset impairment the decreased million net fourth our turning the for the primarily contracted Now statements distribution the our profit more lapping points basis with of the This gross $XXX down quarter. QX productivity due year. XX%, XX%, $XXX driven business. year. week sale financial Fourth The

for million charge overall million $X $XX with $X $XX $X partially related of expense. intangible to and cost in million, to initiatives, loss to million million $XX decrease legal million negative $X million included operating as productivity loss impairments a million, Non-GAAP in of lower non-GAAP equity million X.X%. settlement sales gain. million, Non-GAAP operating income offsetting compared interest was operating the a was quarter million, was quarter million to of for compared $XX and in The margin compared quarter write-down reflect last to $XX mostly to the and related $XX the simplicity commercial SG&A reflecting other and net for was were the related the was Non-GAAP SG&A timing and of was and to initiatives, cost million noncash, expense to quarter and $XXX million X% $XX spend variances of adjustments $XX investment million $X Net XX.X% $X XX%. compared These percentage non-GAAP related contracted volumes to for year. income non-GAAP goods,

per share year, Adjusted earlier was million. earnings per compared non-GAAP last for quarter dividend non-GAAP EBITDA $X.XX compared GAAP was stock a of to loss the year. And loss for $XX was $X.XX. million per share $XX share adjusted this $X.XX the to

segments, week. excluding provide impact TDBBS. starting some decreased sales X net The Pet was $XXX insights due primarily fourth net an quarter lapping the with the into of million. Now decreased of XX%, Organic extra XX% to I'll to decrease sales Pet. our

quarter. durables to POS and a be POS soft standpoint, continue outpaced shipment remain shipments from for positive and consumables While the

over we we market total share record brick-and-mortar. reached continue prior label pet online. XX%, rates, e-commerce points year pet offsetting conversion Sales up products of improve of as sales. a drive Overall, held share branded and E-commerce sales a in as percentage in high with of slight outperformed our our declines growth gains to X private

initiatives. related low-profit of cases, a some and spend X% Non-GAAP was in where to exiting and to Non-GAAP share gains continue operating $XX to versus income to both rawhide, This we year versus demand and label is timing and ago. resilience with brands operating And SKUs. purposefully bird. where linked ago, a for dog lower $XX declines margin in volume and organic X.X% productivity the TDBBS. durable than been with Pet our more and treats commercial of million offset due private Our year products addition primarily million in have soft, demonstrate was rationalizing

Pet to compared segment ago. adjusted million year EBITDA was million $XX $XX a

In business, similar decline net Garden versus was ago. net Garden. to XX% million, sales fourth to the sale $XXX Organic the excluding year week. the distribution XX%, a Moving the decreased quarter, to sales due lapping were primarily Pet, the of extra down

Importantly, POS returning improved split fourth to traffic trends saw above after positive home a quarter, third we in and centers challenging quarter, a prior year. the in level return

Moreover, Garden to we performance loss margin and retailers million Pet sales, strong a for new impairment and inventory. growth videos double-digit grass Non-GAAP to positive compared posted XX.X% the million e-commerce prior negative year. saw negative Garden was $X $XX loss continue to drove we which higher $XX seed, Garden items of was to operating segment in in engagement X%, adjusted was $X addition Non-GAAP improved all lesser rates. million see the made is due particularly a conversion compared to displays negative in operating content million in EBITDA grass versus new seed developed and as gains good which and channels. across share in investments a

Let Thanks on had the into cash me a cash year. balance inventories flows. now flow address our We sheet and cash. to record turning focus

even provided high 'XX, at amortization $XX to CapEx acquisition all-time was Cash $XXX the XX%. prior versus year. in million, $XX the year, the million last by year $XXX in at prior operations to million and $XX of what the down million. XX% about fiscal our than less was for year-end, Compared inventory Depreciation in invested was million we with was TDBBS compared year. an of

approximately quarter 'XX, November Subsequent fiscal for we through million. fourth purchased to approximately shares additional roughly the million X.X year-end, During we XX. fiscal XXX,XXX million roughly bought back $X for $XX of shares

$XXX we of in for Total lookout had investments, companies line given facility at range Cash year with on target scale million the a debt to this gross prior million were $XXX at was with credit margins under our to the in $X.X facility, ratio billion, ample in Coupled our the million inter-adjacent be core including We to categories the X.Xx. M&A. quarter prior and key And us short-term prior X $XXX year. end year. our accretive the the leverage borrowings in categories, within with provides build line We financial ended for year-end equivalents, credit also our compared X.X%, with with of strength, continue of and with consumables and year. the to add liquidity high-growth capabilities. no

outlook. to our turning Now 'XX fiscal

headwinds our are weather or this uncertainties, the As the confidence around customer balances geopolitical be and in 'XX macroeconomic have volatile non-GAAP Niko we pressures people against mentioned, to and our we consumer $X.XX conditions. carefully us This fiscal of EPS strategy and guiding we and in front see better. year

most across approximately $XX our to planning we're CapEx, both needed either initiatives million to of or invest for to is maintenance look productivity we which As segments. $XX million,

quarter QX end we loss that smallest non-GAAP loss is quarter. given even the be of quarters per of or We better remind the at shipping I year. to compared is want not less more for full one this days a It typically last expect have the year, year. indicative $X.XX X you QX to our of to and case share

Simplicity the from Cost As acquisitions, or outlook fiscal during the This for activities that year projects may impact under always, restructuring divestitures 'XX. includes and fiscal our program. QX excludes occur and any

all that, we'd for open questions. your the to like And with line

Bill question Securities. And Chappell, comes Truist Instructions] first [Operator from our

it kind guess tough going 'XX. for ease would it from thought back seat. we Pet year into the And congratulations, and kind Niko long, get as the pandemic? that of ago, X glad about -- hangover moved a Niko, talked to But the have was you as I normalize of the overdue. we long And was would we half a to things questions. One, you're Brad, in just year.

like we state to category and is grow what's in to out we multiple bottomed the So organically as categories? is going we've feeling feel again longer? of particular, like to bit start little Do as a Are going a today? Pet, hangover last or

What Even John. durables, consumables but double-digit QX, durables outperformed 'XX the category is continue a came we you this true, digits. in to have Bill, told for double down largely decline. was

skew I think down teens right because at SKUs. more were a have than low double digits. continuing And unprofitable we to little actually been bit that we low-margin

consumable we business on down business is at going you pulled still category by QX, our think how forward. is of up POS, look the getting that indicative But right? more was view If durables. the We

and we bit. a quarter thing, other in The last the this mentioned

the and of we out like. product look consumables visibility managing category, we And looks as in digits, side, example, we businesses see to durable help? what minimis of decline Asia. And business don't next the around But at low mid-single the I'd we're Temu, durable durable year, -- directly and like But tariff. we're something to consumers that call have On Does are we that a appropriately it. we're on de growing continuing our as get category, roughly staying forward. e-commerce buying going top the that mid-single digits, see there's an into it's data

you durables That of the helps. consumable? versus percentage sales remind Can us is

Yes.

For the category, it's XX%. roughly XX%,

consumable. XX% over we're us, For

Got it.

question, we for planning you assuming increases 'XX, just Second Garden? price as and Pet into are on look both are you or

going commodities much negative tough. knows plan, on next net very, the pricing because everyone Bill, we're price our that very it's moderated. very to In have -- year will actually be be

and the into that year. we more margin will just of very chin program it That's It headwinds to the on maintain by. makes going on to to opposed line. difficult can pricing the come taking much so top be Cost as our that going the Simplicity So important one be

So come going now really well the will given hard segments as in consumer pricing right by, well. of terms commodities the be on I out think, as to as what's value-driven in there very both being

Our Capital next question KeyBanc Thomas, comes Markets. from Brad

start we J.D. on for spring and a shelf are the particularly was to wanted that think had the of I asking about congratulations. us space hoping Niko conversations have the last about and and live after about some Brad, sell-in spring as going you amount year the -- could off I update thinking and opportunity Garden such goods segment of you're how to particularly you're you that give an how going the the industry? poor

for Brad, thanks the question.

I cautiously feel think when forward spring. look we we optimistic to the

We our are the listings with a the heading into will The say they good promotional we're signaling for are next from customers load very now for of year. We in I'd lot year. already know early. And standpoint, negotiations the a branded that support. stores customers shape in our

of As Niko shipping days we mentioned, quarter. couple the in the a of less at end script, the have

QX, the beginning at for So an end shipments we the of store of awful of sets season. initial lot the shipped the at

the So to approach signaling cautiously to to December, optimistic. will the take trickle they January. end say they're the aggressive that are into going it loading I'd an live if ready regard season. for at also we're doesn't With of it and But goods, ship getting stores

own network. take some cost to, I key steps think we've one, taken internal of out here our

secondly, us. the some to And that downside steps take to category risk limit for

goods mainly driven. year, QX weather last was live had we an Now it and awful in

be the And QX impact a our can on when out would negative in weather was rains that summer that X than next season. this to hard X were the weather of we worse it and into the have weekends So past came It's on year hottest imagine us to it key record. of still went year.

seeing we're the very that, consumption some regard category. to live in said with having encouraging signs goods So

'XX. QX QX Going of our year and into our fiscal into

I'd both entire word the here is goods So Garden cautiously the segment. the for optimistic live say across and

at about acquisitions the and is, can with run really of some just, us you on a I that and helpful, tariffs guess ask playbook administration think current you does again, Niko, both from that And tariff the front, in as think if maybe J.D. tariffs about administration maybe as the would do to China? you this opportunity the That's backdrop, exposure remind around the and I about think you on I And acquisition, for here change if you that's their anything your there's coming horizon? all, we unusual just bucket could policies. and then the question one

Sure.

that looking So of other for of regions. coming coming one sort XX% for together looked keys China at we we put the at potentially plans in XX% from from our and we're tariffs then as And in 'XX.

So our play what's if those now, whether we've saber happen, past, have our China. to it's the on goods. of impact out X% going an of things know in of to or hard will update tariffs, lot all tell of to an right it talked rattling about a cost specifically I exposure

with below the the so we're With decrease, lining now X% coming in the decrease in silver durables that from China.

much that's again, So pretty And was silver if it. a much lining, exposure. less there

the look as in one new operate strategically great part heightened one deal could but activity categories, for bring M&A entering a opportunities of if regulatory As we're that because 'XX. are us, phase, a in where elections reduced at pressures, we're really increased really I behind it's X far really future, the we you positioned with and how X question, and think your we important

balance really liquidity these So capitalize only them, ready poised leverage to sheet. to on navigate but how are we're to position conditions, favorable -- not on preparing these changes our our also we we're exceptional given

I an insurance stay best we the ensuring evolving we think of, it's So landscape. of in can policy that that can think ahead

next our Jim Crespi, Chartier, comes And Hardt. question Monness, from

sounds and be Niko well. bit the next like is It Congratulations going a Brad as Pet business up little to year. to

sales company overall particular? business the Garden in for the in of kind understand guidance us help of kind Just the

exceptional don't it's I we're a going We pretty top not of that year. the overall, to the cautious into going on line. guide Yes. But year say typically would growth. be

to have I going think that any really growth fight we're to for. we get,

-- Pet going add going walked I on business challenge. would also to from so too other And And is that's be the I real the to some be side. a away -- we thing it's think

So will, there's for company very meet durable margin right really some if business focused standards, now. the low-margin margin you very, we're didn't our that as

So of, a we to good have that. away at but think from low-margin little that hole a bit ended we business, dig some way shot our a creates that of got we up which walking we've out

on on kind be that that little a just because our a durables share We're of bit, to the side, more We'll lose digits. it said declining durable And I expectation be next of mid-single category year. down as going will in the SKU rationalization.

the really other is pet thing, catalyst and penetration. household on Well, too, is what's side the the big

a a And we so this puppy. And we the pullback of of the terms where a and the growth in whose in buying The we've we've incredible of saw cohort passing in good of a much is generation category a a Zs, but seen pets the after news is got not millennials are older re-upping. bit during penetration. saw younger terms Gen are everyone pullback pandemic bit rate

and another more travel back so in they're to buying as experiential engaging and things dog. And opposed going

a So starts world, mainly one to here. -- be everybody stuck has sales. that view to folks cats better. the until a well. durables stuck We're to and -- in as the durables at cats. it's category that a the being talking of I'm animal that done turn live bit tend the knows, dog the Cat here. because the sales animal which we're return that's really reasons dock, as purchase little and office we for bit better. continued the sort bus feel bit sort is follow And our the actually of done that's have to And drives Cat in around, of and more independent live We has

that done So area better. has

quarter, grass million. last the would I write-down to think $XX don't I seed $XX said million then know, be, And Okay. you

Just where exactly did that come in?

that in accurate. range. Unfortunately, we Came pretty were

the where $XX million And or? is

it was million. range. high end of was the It on the No, $XX

And year. benefit does then cost tough you pricing year initiative? before simplicity cost next What for your to of Okay. take outlook like look mentioned your next the

becoming the done everything the manufacturing. to to more have taking what job to end that We're more discount be Those outlook promote look to become we that. can a promotional real environment Are you great out. organization. cost doing question we going to going better tell The in I is play We've will over But our mean still at years does will We're I a have continue the good. things marketplace? out. we're on do like cost efficient, to our better more.

question Bob our CJS from comes next Securities. And Labick,

We'd like as to I talked we and Brad bit our offer so congratulations little to a headwinds Niko revenue guess about far. well.

for You've said that et kind could us should about any walking you some was be certainly, the any sense And I lower-margin hoping cetera. revenue tailwinds business, give here? a consumer, pricing, then going from of see thinking 'XX? of other fiscal headwinds we you

going sort margin side Yes. the line. had create say I area. tailwinds of of a bit mean, we it vendor highest top the business Garden I the outlined. gap a on a also not little be -- It's partner what we to lost in our little on bit does would of but I business

tailored to innovate taking our a and We're are up going exceptional We delivering consumers value and digitally. customers also to game through consumer-centric promotions. very approach

think and grow. are is help all that underpinning our that and those can of all disruptions. impact we simplicity, weather-related So efforts we tariffs are going areas supply then around on us continued management, And chain, optimizing these inventory mitigate cost to the

and seeing changing So really in investing that adapting now. we're efficient the right to brick-and-mortar just some then And organization. can offset becoming behavior. think a e-commerce because we challenges better, that consumer of in again, more

So a organization. agile really becoming more

of accomplished next how quantify over date the know would And could years? how the Great. as then this, impact terms on much and have benefits you've Okay. how fiscal opportunities ahead benefits the as in 'XX, future to you and it relates to then what characterize I Cost you'll don't and Simplicity, remains much you -- several

of from then and facilities is about made tell staying We progress. taking that. cost out timetable giving be invariably, businesses. I quantifying all 'XX, it, amount envelope consolidating really because giving a of to wrong and away What consolidating Yes. numbers a we're we're we've we'd Again, in those tremendous big facilities XX and cost would we're you closed a hit

look cushion with business on side you If K&H. did the at what and pet we bedding, pet our

us around efficiency form and these for So, you're seeing platforms scale. really aligning

really We is it a never have We're into in through the I think company and ours where doing a also 'XX going ways like the when a we more agenda work And done. to have acquisition that really to be future. you and we look go. M&A big at of grow

to bigger synergies our looking better integrate, continuously we table acquisitions. bring the we and you're to platforms So can and are, costs the take more do efficient the out, become when more

feel us we and going like up once an really sets M&A. acquirer we in forward engage better us even So makes it

from Our next Brian Genuity. question Canaccord comes McNamara,

mid-single-digit the and what's offered our in to return just should to the category Pet the expensive current a course, again. ago, and at Pet of CFO Brad growth congratulations A kind environment? curious too of specialty pets of get industry future." one macro months Are retail in "not-too-distant your there an that on customers promotions. Of couple Niko to your growing is what take I'm required the expectation the

what I with I animals, of think out get that's back live animal. until going more I flatlined. there Oh, would is folks stated And starts sort kind lot, earlier, which category God, we pet to the it to see buying of a live we're the really go

particularly the to the real of But need unit things a going There's in household lot a and other premiumization think I you're of we improve food Pets growth, here. that to to on, themselves. work seeing get of lot penetration treats.

pre-pandemic limiting So view, the below in that's our In some categories, levels now. factor. really rate right we're

Can Garden public for weather product weather haven't us this the you years you risk? or Garden lines Obviously, is X have diversify maybe remind helped to And mitigate and made helpful. are as very exposures. any clearly what J.D. our important last your And X being of ideal efforts for kind business. That's of competitors weather your there

question. great Yes,

at our the feed little our think business, that bird you wild a portfolio, bit is counter business. have garden X is I and actually business if typical that lawn to we do seasonal look and

a to it's But see our Garden storms, the that couple our spring. would months, winter ideally, like in would offset we portfolio. be that, harsh a spike moderate rest nice to to with unlike So to precipitation. of We'd see, winter ideally, if the tell every was sunny we'd and we've and Wednesdays Ideally, lawn rain beautiful. like temperatures, summers and traditional things warm business, late-breaking and last the and on great seen people, like in of weekend it temperatures years it see tend I

So few haven't years. ideal a would just in We weather. seen that for that be

from comes Our JPMorgan. next question Chowdhury, Shovana

I Niko Congrats I ask to X Brad, to wanted questions, both and if may.

growing for been it more You pressures how about of brick partially segments, the e-commerce mortar. seeing some both less offset and has the spoke may and or or after in has be you

current are your you're said give you to with levels? like Asian you Can metro top next the on a e-commerce us promotions is Can and the may, game seeing may as your given some And I year cheap more give of can who -- the such promotions, how also, environment prepandemic so attracted And digitally and you be more elaborate upping taking more on understandably, color help result? a ask impacted I'd the you are and about Temu. versus you sense if as of of this also called like consumers level share to growth. line the steps what market to out you're

I'll a the hired made some question. great we've of really We've start We e-comm in tremendously talented e-com. lot progress people. with Sure,

business omnichannel an at That's looks have that. a look lot doing. orientation they're to of And that an from -- they have you standpoint. the customers, want If we at what

of kind going and inventory and sure is the content A really getting And an first having for that SKUs product between symbiotic that really the ship. with off-line. really is available it all it's oversimplify management, there. and your just It's the A+ it, is online content So step to making to but part really starts a other then relationship out

a tackling. it So it may sound oversimplistic, starts little but really bit blocking with and

fail, lot in conversion engine constantly And And search optimization, other have where Then different take that we if fast that. go progress we terms improving ad and of to those program return can there's to out. and increase rates, a the there. drive terms on of and conversion customer angle a then I site spends. been monitor we in the we We on an of there's think the things test things do really fail they rate we extensive trying

that's distributing too the having and part are fulfillment we other The capabilities, company. across is own your something that

Back in and 'XX, business we country. bought across we're where taking capability, DMO. They distributing it process the had an incredible fulfillment software their their really and

e-comm, we that flexibility XP it most do possible. are ourselves we e-tailer way where ship to in a or an situation fulfilling the So that to in we're position where either efficient have a

a having logistical marketing also it's So well. as standpoint, it's capabilities digital it's very from much

capability it's business we've I for add And the capability Pet e-comm. This thing that's systems, I'd or we share X of the that's built Niko that's grown X years a points, that only up year, XX% processes in was ton Yes. people, DMO X mentioned. our the Niko here and on year-on-year, mentioned, that think, of e-comm, side,

good and a enhance that So we've playbook. playbook continue got to we to want

that as is having we to to to But that's as to really continue pack fulfillment sizes going growth and the forward, lean that enabler right need. channel. hit and Some key important it going the is go well an of to points help as into continue be we price that piece be the

And has seeing if you're and the share has? impacted on it market the was you your how what other level pre-pandemic promotional versus levels do and question being

to J.D., you want take it's Well, mean, it? I

the just more a in a Well, only know at promotional lot time. anticipating We're The for calendar spring I planning beyond this -- coming promotional months they're year, early are few out, to not is a so point much of yet. but details of marketplace don't we was Garden. going the speak they this not

of bid in process aggressively, a are marketplace. we'll bidding promotions, we land and So to be expect the those some to it very competitive we but

think by Yes. of said the earlier, be I that environment harder it we're deflationary because in. to growth, is again, come to going I overall just

promotional very, a And 'XX very in we from become so think, competitive, to it's going standpoint.

Our next Casella, question JPMorgan. comes from William Reuter, Bank of America. Correction. Carla That is

Can you hear me?

barely. Yes,

All right. hear Can you problem me? with having connection. I'm my

better. That's

Okay.

you One, us on how kind where questions you'd leverage comfortable right give with XXXX about Sorry about transaction be of there. find you of taking if M&A Can or talked totally that. of and taking you terms changing high -- guidepost couple the some environment in zone agree leverage the is your A of or you comfort for here. transactions?

to we'd Yes. We'd X. willing something into direct to to to but sight need be get X, over our We over willing leverage. go Xx X.X, lean line of be have it a back to

front, around? tariff 'XX, the the best how the this mitigate potential mitigant back what change look this go does at -- And 'XX, then the Great. And Okay. as on looking were you could the or tariffs? at you

Those out putting we competitive. time with a think to sourcing Those I -- product, ways again move and where because if for position. of little some we're X tariff it. were then from work to lower those it taking last at I look really a I kind We'll at extent the let's can't it a getting They are vendors then a several I to look doing last were looked bit talk XX% point can we much we'll be have don't and they no think either that and tariffs the the there were be countries don't China the are believe We in-sourcing. are you different can we -- on you just does second. or time. options. that did things tariff cost lower if it at just think

though. Fortunately, our is exposure lower,

plays a role us. So pretty big that for

that on terms there? many And How in-source opportunities How further more what inning just then today? And are program. -- process? in you are where cost in, you you one much simplification outsource the Great. versus are of in

now. progress of probably inning of put a would fifth I fourth, question. right last year. this kind made Good We a maybe lot midway

going pretty year big well. 'XX. is no are progressing to another in be 'XX said, with disruption. things out nicely. quite And us business we But to I as think took Like for really, facilities I XX minimal

take have no that done that excellence. to the just opportunity I disruption work. a just with there out I'll business was amazing performing call there So quick really that teams

getting quite good at we're it. So

And Reuter, of William America. our next from question comes Bank

mentioned you on is So is cash be outlook that you sheet clearly going to the balance have your ton down. Pet a that the of still industry

XX you think than digits coming down Are which participants most commensurate the I I this said year. or in industry is for mid-single expected for more XX outlook, months think valuations subdued acquisitions ago?

that whole my I much. of high in the 'XX. Pet ranking to there, businesses on seen flow we me pretty be consumables. still seen Pet of We've lot the of relationships expectation On all terms there's in side, lot a the durable know a haven't not But multiples. going side deal out great assure but is immense

choose to lots from. have we'll So

'XX demand. So over favorable midst but is deal flow environment lot a the cheeky, really of will I'm going the pick more a lot think being just little election I of pent-up up a there of regulatory that being a into optimism that in and

at IPOs, been the fairly name you it, X. has the If last year level transactions, you look anemic or of

a from So we supply demand, a pent-up both that lot demand there's of believe and standpoint.

advantage So being to than that. now we're we of take more think better looking forward frankly, right positioned can't And are of I seeing deals.

Okay. And then follow-up. just one

consider targets, of you mentioned side the of M&A mentioned Pet? would it. that and That's Garden Pet, targets you the additional you durable the consider are consumables terms either in on side and you In Or would business? M&A

Depends on the deal.

not, think in what's little look durable to now I for our heads given the had wrap at a an we deal harder is, But that around side we us on. or Garden if believe going legs, across it right think it. came attractive would

we going and where be I think to value. it's see deal very specific

durable never the say longer put, is But a piece. think I'll durable the I no. So

we further want would add business. This is I Brad. strategically, think is I exposure our to any One in to seasonality avoid thing

well a key that's we at. look in So what as driver

And our last question from Holden, comes Barclays. Hale

Hale. Mary Ann on for Neale is This

to inning be questions. and what back your transaction, a Bill's pursuing in the terms you M&A in Could bit Carla of might on of a Just speak please? little you pipeline

an Yes. really uncertain business. We M&A -- is

in what or inning those There's So processes we're few a we What uncertainty win can all but what outcome in in. lot because reluctant as things up terms we're pretty I color picked there's to is little the in you share right knows. give guarantee of a to now. little is no those everybody a I a have can that's there. tell bit. of We're much

out looking we are bit, have So things at -- up picked just that there a know little stuff. and

there no are remarks. to to Edelmann the floor turn for time. with And at further this would Friederike back questions like I closing

Thank today you wonderful have earnings for a attending and call our Thanksgiving.

If you me have the further to the questions, out Enjoy reach wise. rest other and day. please of

today's We participation. thank conclude Thank for you. teleconference. your does you This

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