Some pet owners will do about anything for their hairy human, I mean, animal, friends. It's the unconditional love our furry companions give us (maybe because they don't understand most of what we're saying) that drives us to spend outrageous amounts of money on them -- buying everything from squeaky toys to indestructible balls. One enterprise cashing in -- while we cash out -- is Central Garden & Pet Company
Net sales for the pet supply operator have grown 10.6% and 9% in fiscal years 2004 and 2005, respectively. The trend continues with a 10.2% net revenue increase in the first quarter of fiscal 2006.
Its Pet Products segment saw sales rise 6.6%, compared to the same period a year ago. According to management remarks in the conference call, this unit is being weighed down by "lower demand for high-end aquariums." This is being offset, however, by growth in dog and cat products. The company hopes to continue capitalizing on this momentum by introducing a series of new products this year, including edible chews from Nylabone, a resilient line of toys called Chubby Buddies, and a bacon-flavored BBQ cob bone.
The company's Garden supply division witnessed the greatest growth, climbing 15.4% year over year. Grass seed and birdseed were two categories that contributed significantly. One product highlight is Nature's Defense, a new line of wild bird feed.
According to APPMA's (American Pet Product Manufacturers Association) most recent National Pet Owners Survey, U.S. pet ownership has increased 7.6% since 2002, with 63% of households owning a pet and 45% owning two or more. The pet supply industry is growing right along with it. It is projected to be a $11.1 billion business by 2007, up from $8.5 in 2004. And Central Garden & Pet Company is positioning itself to take advantage of this opportunity.
Management indicated that two areas in particular are key to their growth strategy. One is internal -- improving its return on investment through cost reductions and renewed product innovation. And the second is external -- synergizing brands and bringing these products to the market faster, making it easier for customers to do business with them.
Central Garden & Pet Company is in a highly competitive market, but recent sales trends and plans to sustain this momentum suggest that it is well-positioned within this industry. As such, this stock is worth a second look by prospective investors.
More on the pet supply industry:
- There's a bite to go with PetMed's
(NASDAQ:PETM)needs some love after its latest results.
- And last quarter Petco
(NASDAQ:PETC)left a present for investors.
Petsmart is a Motley Fool Stock Advisor pick.
Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.