Central Garden & Pet Company (CENT) does not show promise, as the stock has lost much of its momentum since the start of the year, having tumbled 38.2% so far. With no major catalyst as of now, the stock may have a tough time ahead. Also, if we try to gauge the stock from the perspective of quarterly performance, it gives a bearish picture.
Central Garden has delivered negative earnings surprises in the last 4 quarters with an average miss of 23.9%. In the last reported quarter, it posted negative surprise of 34.8%. This gave us enough reason to downgrade the stock to a Zacks Rank #5 (Strong Sell) on Dec 12.
A sluggish discretionary spending environment remains a concern for the company since a significant portion of its product portfolio comprises premium offerings. Though the company has cost containment and margin improving initiatives in place, it will take some time to return to the growth trajectory. But as of now, transformation activities have failed to show the desired results.
Central Garden is witnessing downward estimate revisions after reporting dismal fourth-quarter fiscal 2013 results on Dec 10. The company’s fourth-quarter adjusted loss of 31 cents per share was wider than the Zacks Consensus Estimate of loss of 23 cents and loss of 21 cents reported in the year-ago quarter.
Central Garden’s top line decreased 7.1% year over year to $368.8 million in the fourth quarter, and widely missed the Zacks Consensus Estimate of $396 million.
The disappointing results have triggered a downward spiral in the Zacks Consensus Estimate. For the first quarter of fiscal 2014, the Zacks Consensus Estimate of a loss of 31 cents widened by a penny in the last 30 days. For fiscal 2014 the Estimate dropped 33.3% to 38 cents a share over the same time frame.
Other Stocks to Consider
Not all retail stocks are performing as disappointingly as Central Garden. Some better-ranked retail stocks that look promising include Conns Inc. (CONN) and Hanesbrands Inc. (HBI) that carry a Zacks Rank #1 (Strong Buy) as well as Nutrisystem, Inc. (NTRI), which holds a Zacks Rank #2 (Buy).
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