We have maintained our long-term Neutral recommendation on Central Garden & Pet Company (CENT). Moreover, Central Garden, which focuses on lawn & garden and pet products, carries a Zacks Rank #3 (Hold).
Why the Reiteration?
Central Garden & Pet’s primary focus is on streamlining its cost structure, increasing operating efficiencies and concentrating on revenue growth through better pricing and brand-building initiatives.
The company, for a considerable amount of time, has been laying emphasis on improving its gross and operating margins. To achieve its goal, Central Garden & Pet has tried every means to consolidate manufacturing facilities and logistics centers, make prudent capital investments and improve manufacturing efficiencies.
Alongside, being the leading producer of garden and pet supplies products in the U.S. and with a diversified portfolio of brands, Central Garden & Pet developed a healthy commercial relationship with giant retailers, such as Wal-Mart Stores Inc. (WMT). We believe this provides a significant opportunity for the company to drive profitability.
However, management remains cautious about the upcoming quarter and stated that third-quarter earnings are expected to remain low when compared with the prior-year quarter.
We believe that the company’s transformation activities are failing to show the desired results and therefore we remain skeptical about the future prospects of the company as the lack of improvement is dashing all hopes of recovery, at least in the near term.
Other Stocks to Consider
Until any further upward revision in the Zacks Rank on Central Garden, other stocks in the consumer discretionary sector worth considering include Brown Shoe Co. Inc. (BWS) and Wolverine World Wide Inc. (WWW), both carrying a Zacks Rank #1 (Strong Buy).
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