CENTRAL GARDEN & PET CO (CENT)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Company

Central Garden & Pet Company (“Central”) is a leading consumer goods company in the U.S. pet and garden industries. For more than 40 years, we have delivered innovative, trusted solutions that help lawns grow greener, gardens bloom bigger, pets live healthier, and communities grow stronger. We operate through two reportable segments: Pet and Garden.

Our Pet segment offers a broad range of products for dog and cat supplies, including treats and chews, toys, beds and containment, grooming items, waste management and training pads. We also provide supplies for aquatics, small animals, reptiles and pet birds, such as toys, enclosures, habitats, bedding, food and supplements, equine and livestock products, animal and household health solutions and insect control items. This segment also includes live fish and small animals as well as outdoor cushions. Products are sold under well-recognized brands including Aqueon®, Best Bully Sticks®, Cadet®, C&S®, Comfort Zone®, Farnam®, Four Paws®, Kaytee®, Nylabone®, Zilla® and Zoëcon®.

Our Garden segment includes lawn and garden consumables such as grass seed; vegetable, flower and herb packet seed; wild bird feed, bird houses and other birding accessories; weed, grass, and other herbicides, insecticide and pesticide products; fertilizers and live plants. Brands in this segment include 3D®, Amdro®, Ferry-Morse®, Pennington® and Sevin®.

In fiscal 2025, our consolidated net sales were $3.1 billion, of which our Pet segment, or Pet, accounted for approximately $1.8 billion and our Garden segment, or Garden, accounted for approximately $1.3 billion. In fiscal 2025, our operating income was $250 million consisting of income from our Pet segment of $216 million, income from our Garden segment of $142 million and corporate expenses of $108 million.

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We were incorporated in Delaware in May 1992 as the successor to a California corporation that was formed in 1955. Our executive offices are located at 1340 Treat Boulevard, Suite 600, Walnut Creek, California 94597, and our telephone number is (925) 948-4000. Our website is www.central.com. The information on our website is not incorporated by reference in this quarterly report.

Recent Developments

Fiscal 2026 Third Quarter Financial Performance:

•Net sales decreased $79 million, or 8%, from the prior year quarter to $882 million, due to the exit of the Pet Distribution business, while organic net sales increased 2.4%.

•Gross profit decreased $15 million from the prior year quarter, while gross margin increased 130 basis points to 35.9%.

•Selling, general and administrative expense decreased $6 million from the prior year quarter to $191 million and increased as a percentage of net sales to 21.7%. On a non-GAAP basis, selling, general and administrative expense decreased $11 million and increased as a percentage of net sales to 20.6%.

•Operating income declined $9 million from the prior year quarter to $126 million and our operating margin improved to 14.3% in the third quarter of fiscal 2026. On a non-GAAP basis, operating income declined $3 million and operating margin improved to 15.4% from the prior year quarter.

•Net income in the third quarter of fiscal 2026 was $90 million, or $1.45 per diluted share, compared to $95 million, or $1.52 per diluted share. On a non-GAAP basis, net income in the third quarter of fiscal 2026 was $96 million, or $1.54 per diluted share, compared to $98 million, or $1.56 per diluted share in the third quarter of fiscal 2025.

Pet Distribution Divestiture

On April 13, 2026, we entered into a strategic partnership with Phillips Pet Food & Supplies ("Phillips"), a leading national distributor of pet products, to form a new pet distribution business. The new business will operate under the Phillips brand as an independent entity focused on scaling a differentiated, high-performance nationwide distribution platform.

Under the terms of the agreement, we contributed our pet distribution business, comprised of net assets of approximately $57 million, including inventory of approximately $69 million, into the newly formed entity. We received cash proceeds of approximately $31 million, a note receivable of approximately $5 million and a 20% ownership interest in the newly formed partnership valued at $26 million. Phillips and its existing investors hold the remaining 80%.

As a result of the transaction, we recognized a pre-tax gain of $2.5 million during the quarter ended June 27, 2026, which is included in Other income. Pet Distribution's net sales in fiscal 2025 were $474 million.

Subsequent Event

On July 27, 2026, we announced we entered into a Sale and Purchase Agreement (the “Purchase Agreement”) to acquire 80% of the outstanding shares of TRIXIE Heimtierbedarf GmbH & Co. KG, a German limited partnership (“TRIXIE”) together with certain related entities. TRIXIE is the leading European pet supplies and pet snacks company and headquartered in Tarp, Germany. The acquisition strengthens our portfolio of pet and garden brands and represents a major step in expanding our presence in Europe.

Under the terms of the Purchase Agreement, the Company will pay a total consideration of up to €400 million, with an upfront consideration of approximately €340 million paid in cash at closing and an earn-out potential of up to €60.0 million based on 2026 performance, each subject to certain adjustments. Certain shareholders of TRIXIE will retain approximately 20% of the shares of TRIXIE (the “Continuing Shareholders”). At future dates over at least three years, the Continuing Shareholders will have the right to require the Company to purchase their shares, and, if those rights are not exercised after three years, the Company will have a corresponding right to purchase those shares from the Continuing Shareholders.

The consummation of the Company’s acquisition of TRIXIE is subject to regulatory approval and other customary closing conditions. The acquisition is expected to close in the first half of the Company’s fiscal year ending September 25, 2027.

Results of Operations

Three Months Ended June 27, 2026

Compared with Three Months Ended June 28, 2025

Net Sales

Net sales for the three months ended June 27, 2026, decreased $78.5 million, or 8.2%, to $882.4 million from $960.9 million for the three months ended June 28, 2025. Organic net sales for the quarter ended June 27, 2026, which excludes the impact of the divestiture of the pet distribution business divested in April 2026, the closure of our operations in the United Kingdom during fiscal 2025 and the acquisition

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of Champion in December 2025, increased 2.4% from the prior year quarter. Our branded product sales increased $19.0 million, and sales of other manufacturers’ products decreased $97.5 million.

Pet net sales decreased $92 million, or 18.7%, to $400.5 million for the three months ended June 27, 2026, from $492.5 million for the three months ended June 28, 2025. The decrease in Pet net sales was due to the divestiture of our pet distribution business in April 2026. Pet organic net sales for the quarter ended June 27, 2026, which excludes the impact of the pet distribution business divested in April 2026, the closure of our operations in the United Kingdom during fiscal 2025 and the acquisition of Champion in December 2025, increased 1.7% from the prior year quarter. Pet branded product sales decreased $2.8 million, and sales of other manufacturers' products decreased $89.2 million.

Garden net sales increased $13.5 million, or 2.9%, to $481.9 million for the three months ended June 27, 2026, from $468.4 million for the three months ended June 28, 2025. The increase in Garden net sales was due primarily to increased sales in wild bird feed, controls and grass seed businesses, primarily volume-based increases from increased retailer listings. These increases were partially offset by lower sales of third-party products, due primarily to the distribution loss of a product line. Garden branded product sales increased $21.8 million, and sales of other manufacturers' products decreased $8.3 million.

Gross Profit

Gross profit for the three months ended June 27, 2026 decreased $15.1 million, or 4.5%, to $316.9 million from $332.0 million for the three months ended June 28, 2025. Gross margin increased 130 basis points to 35.9% for the three months ended June 27, 2026 from 34.6% for the three months ended June 28, 2025. Gross profit decreased in Pet by $22.4 million partially offset by an increase in Garden of $7.3 million while gross margin increased in both segments. The decrease in gross profit was due primarily to the divestiture of our pet distribution business in April 2026. At the same time, gross margin improved due primarily to both the positive impact of the divestiture of our pet distribution business, which had lower margins, and our cost and simplicity initiatives in both segments.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $5.8 million, or 3.0%, to $191.1 million for the three months ended June 27, 2026. As a percentage of net sales, selling, general and administrative expenses increased to 21.7% for the three months ended June 27, 2026, compared to 20.5% in the comparable prior year quarter. Selling, general and administrative expenses decreased in the Pet segment partially offset by an increase at corporate. Excluding the facility closure costs and business exit costs in both quarters, non-GAAP selling, general and administrative expense decreased $11.1 million, and selling, general and administrative expense as a percentage of net sales was 20.6% as compared to 20.1% in the prior year quarter.

Selling and delivery expense decreased $2.4 million to $91.6 million for the three months ended June 27, 2026 as compared to $94.0 million in the prior year quarter. Pet segment selling and delivery expense decreased due to the divestiture of the pet distribution business. The decrease in Pet was partially offset by increased expense in Garden due primarily to increased advertising and increased delivery costs due to the higher sales volume and fuel surcharges.

Warehouse and administrative expense decreased $3.4 million, to $99.5 million for the three months ended June 27, 2026 from $102.9 million for the three months ended June 28, 2025. Both Pet and Garden had lower warehouse and administrative expense partially offset by an increase in corporate expense. Pet warehouse and administrative expense decreased due to the divestiture of the pet distribution business while Garden had lower expense due primarily to lower facility closure charges in the current year quarter and lower variable compensation amounts. Corporate expenses increased $7.0 million due primarily to higher third-party provider expense, driven by M&A activity expenditures and higher payroll costs related to our investment in data improvement and AI readiness. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.

Operating Income

Operating income decreased $9.3 million, or 6.9%, to $125.8 million for the three months ended June 27, 2026 from $135.1 million for the three months ended June 28, 2025. Our operating margin improved from 14.1% in the prior year quarter to 14.3% in the current year quarter. The decrease in operating income was due to a $78.5 million decrease in net sales partially offset by a 130 basis point increase in gross margin and a $5.8 million decrease in selling, general and administrative expense. Non-GAAP operating income decreased $3.0 million, or 2.2%, to $136.0 million for the three months ended June 27, 2026 from $139.0 million for the three months ended June 28,

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is management’s discussion of the financial results, liquidity and other key items related to our performance. This discussion should be read in conjunction with our consolidated financial statements and the related notes and other financial information appearing elsewhere in this Form 10-K. This Form 10-K contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those indicated in forward-looking statements. See “Forward-Looking Statements” and “Item 1A – Risk Factors.”

Business Overview

Central Garden & Pet Company is a leading manufacturer and distributor of branded and private label products for the lawn & garden and pet supplies markets in the United States.

In fiscal 2025, our consolidated net sales were $3.1 billion, of which our Pet segment, or Pet, accounted for approximately $1.8 billion and our Garden segment, or Garden, accounted for approximately $1.3 billion. In fiscal 2025, our operating income was $250 million, consisting of income from our Pet segment of $216 million, income from our Garden segment of $142 million and corporate expenses of $108 million.

Fiscal 2025 Financial Highlights

Financial summary:

•Net sales for fiscal 2025 decreased $71.4 million, or 2.2%, to $3.1 billion. Pet net sales decreased $30.8 million, or 1.7%, and Garden net sales decreased $40.6 million, or 3.0%.

•Gross profit for fiscal 2025 increased $53.6 million, or 5.7%, to $997.3 million and gross margin increased 240 basis points in fiscal 2025 to 31.9%, from 29.5% in fiscal 2024. On a non-GAAP basis, gross margin increased 210 basis points in fiscal 2025.

•Our operating income increased $64.7 million, or 34.9%, to $250.0 million in fiscal 2025. On a non-GAAP basis, operating income increased $42.2 million, or 19.0%, in fiscal 2025.

•Net income for fiscal 2025 was $162.8 million, or $2.55 per share on a diluted basis compared to $108.0 million, or $1.62 per share on a diluted basis in fiscal 2024. On a non-GAAP basis, net income in fiscal 2025 was $174.2 million, or $2.73 per share on a diluted basis compared to $142.4 million, or $2.13 per share on a diluted basis in fiscal 2024.

Recent Developments:

Wind-down of U.K. Operations

In March 2025, we decided to wind-down our operations in the United Kingdom, which also served certain European markets, and move to a direct-export model. During fiscal 2025, we incurred approximately $10.0 million of one-time closure costs, including $5.6 million in cost of goods sold and $4.4 million in selling, general and administrative expense. The amounts were primarily related to the liquidation of inventory and receivables, severance and legal costs.

Facility Closures

During fiscal 2025, we began the consolidation of two legacy distribution facilities in Ontario, California and Salt Lake City, Utah into a new modern facility in Salt Lake City, Utah, reflecting our ongoing network optimization initiative to achieve a simpler, more efficient distribution network. As a result, we recognized $5.0 million in selling, general and administrative expense, composed primarily of charges for lease and severance costs.

Fiscal 2025 Stock Repurchases

During fiscal 2025, we repurchased 3.2 million shares of our non-voting common stock (CENTA) and 1.4 million shares of our voting common stock (CENT) on the open market at an aggregate cost of $148.4 million. As of September 27, 2025, we had $46.5 million remaining under our 2024 Repurchase Authorization.

Tax Reform

On July 4, 2025, H.R. 1, commonly known as the “One Big Beautiful Bill Act” (the “OBBBA”), was enacted into law. The OBBBA contains numerous federal tax provisions including modifications to the capitalization of research and development expenses, limitations on deductions for interest expense, and accelerated fixed asset depreciation. Because the OBBBA was enacted during fiscal 2025, we have

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reflected the impact of the provisions that were effective during the year in our income tax provision. The impact of the OBBBA on our fiscal 2025 consolidated financial statements was not material. We will continue to monitor the OBBBA and any related regulatory or interpretive guidance and will update our accounting in future periods as required.

Results of Operations (GAAP)

The following table sets forth, for the periods indicated, the relative percentages that certain income and expense items bear to net sales:

Fiscal 2025 Compared to Fiscal 2024

Net Sales

Net sales for fiscal 2025 decreased $71.4 million, or 2.2%, to $3,129.1 million from $3,200.5 million in fiscal 2024. Our branded product sales, which include products we produce under Central brand names and products we produce under third-party brands, decreased $30.6 million, and sales of other manufacturers’ products decreased $40.8 million. In fiscal 2025, sales of branded products represented approximately 79% of our net sales, compared to 78% in fiscal 2024, and sales of other manufacturers' products represented 21% of our net sales.

The following table indicates each class of similar products which represented approximately 10% or more of our consolidated net sales in the fiscal years presented:

Pet net sales decreased $30.8 million, or 1.7%, to $1,802.0 million in fiscal 2025 from $1,832.8 million in fiscal 2024. The decline in Pet net sales was due primarily to lower sales of durable items impacting our outdoor cushions, pet beds and aquatics businesses. These declines were partially offset by increased sales in our animal health business. Pet branded sales decreased $36.0 million, and sales of other manufacturers' products increased $5.2 million.

Garden net sales decreased $40.6 million, or 3.0%, to $1,327.1 million in fiscal 2025 from $1,367.7 million in fiscal 2024. The decline in Garden net sales was due primarily to decreased sales of third-party products resulting from the loss of distribution of two product lines and our planned exit of the pottery business. Increased sales of wild bird feed and private label products were partially offset by decreased sales in both our controls and live plants businesses due to cool and wet weather during the early part of the garden season. Garden branded sales increased $5.4 million, and sales of other manufacturers' products decreased $46.0 million.

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Gross Profit

Gross profit in fiscal 2025 increased $53.6 million, or 5.7%, to $997.3 million from $943.7 million in fiscal 2024. Gross margin improved 240 basis points to 31.9% in fiscal 2025 from 29.5% in fiscal 2024. Pet and Garden both contributed to the increase in gross profit and gross margin.

Gross profit in Pet, in both fiscal 2024 and 2025, and Garden, in fiscal 2024, was impacted by facility closure projects under our Cost and Simplicity agenda. On a non-GAAP basis, excluding approximately $6 million in charges associated with the facility closures in fiscal 2025 and approximately $16 million in fiscal 2024, gross profit increased $42.8 million and gross margin improved 210 basis points to 32.1% in fiscal 2025 from 30.0% in fiscal 2024.

The increase in gross profit and gross margin in Pet was due primarily to efficiency gains and structural improvements resulting from productivity initiatives under our Cost and Simplicity agenda and some commodity price deflation. These improvements more than offset the impact of tariffs.

The increase in gross profit and gross margin in Garden was due primarily to improvements in our Live Goods business in fiscal 2025, from cost reduction initiatives under our Cost and Simplicity agenda and the adverse impact in fiscal 2024 from the write-down of the value of our grass seed inventory in fiscal 2024 of approximately $20 million, due to a significant decrease in the market prices of grass seed and an industry-wide over supply of grass seed.

Selling, General and Administrative

Selling, general and administrative expenses decreased $11.0 million, or 1.5%, from $758.3 million in fiscal 2024 to $747.3 million in fiscal 2025. As a percentage of net sales, selling, general and administrative expenses increased from 23.7% in fiscal 2024 to 23.9% in fiscal 2025. The decrease in selling, general and administrative expense was due to $21.1 million in additional costs incurred in the prior year related to the closure of facilities in both the Pet and Garden segments and intangible asset impairments as compared to $9.4 million in additional costs in fiscal 2025 related to facility closures. Excluding these additional costs in both fiscal 2025 and 2024, non-GAAP selling, general and administrative expense increased $0.6 million to $737.9 million from $737.3 million in fiscal 2024. Decreased selling, general and administrative expenses in both Pet and Garden were partially offset by increased expense at corporate.

Selling and delivery expense increased $6.1 million, or 1.8%, to $345.9 million for fiscal 2025 from $339.9 million for fiscal 2024. An increase in the Pet segment, related to increased marketing expense, including promotional and digital marketing spend, and at corporate, related to marketing investment expense, was partially offset by a decrease in the Garden segment due primarily to lower discretionary marketing spend and lower delivery expense.

Warehouse and administrative expense decreased $17.1 million, or 4.1%, to $401.4 million for fiscal 2025 from $418.5 million for fiscal 2024. Decreased expense in the Pet segment, due primarily to intangible asset impairments in fiscal 2024, and in the Garden segment, related to lower facility closure costs in fiscal 2025 as compared to fiscal 2024, were partially offset by increased corporate expense.

Corporate expense increased $8.1 million due primarily to increased variable compensation expense, increased marketing investment and the nonrecurrence of a gain from a litigation settlement in fiscal 2024. Corporate expenses are included within administrative expense and relate to the costs of unallocated executive, administrative, finance, legal, human resources, and information technology functions.

Operating Income

Operating income improved $64.7 million, or 34.9%, to $250.0 million in fiscal 2025. Operating income improved due to a $53.6 million increase in gross profit, related to a 240-basis point increase in gross margin, and a $11.1 million decrease in selling, general and administrative expenses. These improvements were partially offset by a $71.4 million decrease in net sales. Our operating margin improved to 8.0% in fiscal 2025 from 5.8% in fiscal 2024. Excluding the impact of facility closures in fiscal 2025 and 2024 and intangible asset impairments in fiscal 2024, non-GAAP o

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