Central Garden & Pet delivered record third-quarter fiscal 2025 results, with non-GAAP EPS up 18% to $1.56 and significant margin expansion driven by its Cost and Simplicity Program, even as net sales declined 4% to $961 million on weather, exited product lines, and soft pet durables. Management reaffirmed full-year non-GAAP EPS guidance of approximately $2.60 while flagging intensifying tariff pressure in Q4. The company continued to shift its portfolio toward higher-margin consumables, strengthen its balance sheet, and position for accelerated M&A in 2026.
Good afternoon, everyone, and thank you for joining Central's Third Quarter Fiscal 2025 Earnings Call. Joining me today are Niko Lahanas, Chief Executive Officer; Brad Smith, Chief Financial Officer; John Hanson, President of Pet Consumer Products; and J.D. Walker, President of Garden Consumer Products. Niko will start by sharing today's key takeaways, followed by Brad, who will provide a more in-depth discussion of our results. After their prepared remarks, J.D. and John will join us for the Q&A session. Before we begin, I would like to remind everyone that all forward-looking statements made during this call are subject to risks and uncertainties that could cause our actual results to differ materially from what those forward-looking statements express or imply today. A detailed description of Central's risk factors can be found in our annual report filed with the SEC.
Please note that Central undertakes no obligation to publicly update forward-looking statements to reflect new information, future events, or other developments. Our press release and related materials, including GAAP and reconciliation for the non-GAAP measures discussed on this call, are available at ir.central.com. Last but not least, unless otherwise specified, all comparisons discussed during this call are made against the same period in the prior year. If you have any questions after the call or at any time during the quarter, please don't hesitate to contact me directly. With that, let's get started. Niko?
Thank you, Friederike, and good afternoon, everyone. Let me begin by sharing three key takeaways from today's call. First, we delivered a solid third quarter, driven by strong cross-functional collaboration, disciplined execution, and the unwavering dedication of team Central across all business units. We advanced our operational optimization efforts, consolidating our footprint, refining our portfolio, and improving our cost structure, setting the stage for long-term growth. Third, we remain confident in our full-year outlook, even as we navigate a complex and fluid macro-economic environment. Now, let me expand on these points. First, our third quarter achievements. Our team's strong execution led to record Q3 and year-to-date GAAP and non-GAAP EPS, significant margin expansion, and a major improvement in workplace safety performance within the company.
We achieved these results despite extended cool and rainy weather that negatively impacted the garden season, as well as top-line pressure from the recent loss of two product lines in our third-party garden distribution business, and ongoing assortment rationalization and soft demand in pet durables. These outcomes reflect the dedication, teamwork, and cross-business collaboration across our more than 6,000 employees. Their collective efforts continue to drive our success and pave the way for an even stronger future. Second, progress in our Cost and Simplicity Program. Our Cost and Simplicity Program continues to deliver measurable impact. Highlights from the third quarter include e-commerce expansion. We are excited about our progress in consolidating two outdated distribution centers into a new, modern, direct-to-consumer-enabled facility in Salt Lake City, Utah, which is scheduled to start shipping next month. Footprint optimization.
We recently completed the sale of our U.K. operations aquatic brands to Sara Group and transitioned our U.S. Pet brands to a direct export model to serve U.K. and select European markets directly from the United States. Streamlining operations. With the consolidation of 20 outdated locations and the creation of five efficient DTC-enabled hubs, we've reached a major milestone in our simplification and e-commerce expansion efforts. Strengthened operations. In our live plants business, which operates within a relatively short selling season, we recently streamlined our assortment, exited unprofitable markets, and restructured operations to enhance efficiency. These actions contributed to significantly improved operating results in the third quarter despite challenging weather conditions. These initiatives enhance our operational efficiency, unlock organic growth potential, and support our commitments to environmental stewardship and corporate responsibility.
As part of that commitment, we're proud to highlight a recent collaboration between several of our business units and teams to support animal welfare organizations assisting communities impacted by the flooding in Kirk County, Texas. Our contributions included essential pet supplies such as dog beds, training pads, and treats, as well as a cash donation to Greater Good Charities and the Hill Country Humane Society. Third, confidence in our outlook for the fiscal year. We posted record third quarter and year-to-date results, outpacing the prior year. As we look to the fourth quarter, recent tariff developments and escalated geopolitical tensions have heightened macro-economic uncertainty and put additional pressure on consumer confidence. We continue to anticipate increased consumer value consciousness, heightened promotional activity across retail channels, and ongoing pressure in the pet specialty brick-and-mortar space. Internally, we expect tariff-related inflationary pressures to intensify, especially in our pet segment.
Nevertheless, we are reaffirming our fiscal 2025 non-GAAP EPS guidance of approximately $2.60. This outlook excludes potential impacts from acquisitions, divestitures, or restructuring initiatives that may arise in Q4, including actions related to our ongoing Cost and Simplicity Program. As Brad and I approach our one-year milestone in our roles, we remain confident that our central-to-home strategy is not only the right one, but the foundation for long-term success. We see our unique opportunity and responsibility of blending the agility of a startup with the scale of a large enterprise, empowering our teams to act locally, test quickly, and scale winning ideas. At the same time, we leverage Central's scale to accelerate innovation and market share growth. By breaking down silos and sharing tools, data, and talent across our organization, we create a powerful advantage that will compound over time.
Looking ahead, we remain focused on disciplined cost and cash management while making targeted investments to drive organic growth, especially in e-commerce, digital technology, and innovation. While innovation is still an emerging capability for us, we're encouraged by the early momentum we're seeing from several recent launches. These include Zilla Turtle Sticks, made with black soldier fly larvae and shrimp meal, free from artificial colors and preservatives, and Adams Botanical Spray, a plant-based solution proven to kill fleas and ticks. We also introduced Aqueon Smart LED lights with app control and Aqueon Smart Clean filtration system, which makes water changes faster and easier. Nylabone's Ocean Chew toys crafted from 30% reclaimed fishing nets and our vet-approved Best Bully Sticks with collagen offer a natural alternative to rawhide for active, aging, and sensitive dogs.
Finally, our Kaytee brand launched the All About the Little Things campaign, celebrating the importance of everyday care for small animals and pet birds. We continue to view M&A as a strategic lever to complement our internal innovation agenda and drive long-term shareholder value. While the overall environment is showing signs of improvement, deal activity in our core categories remains muted. Nevertheless, we remain disciplined in our pursuit of margin accretive opportunities, particularly in consumables, and are cautiously optimistic that the pipeline will strengthen. We plan to accelerate our M&A efforts in 2026 as conditions continue to become more favorable. With that, I'll turn it over to Brad.
Thank you, Niko. Expanding on Niko's key takeaways, I'll share an overview of our third quarter results, including the performance of our two segments. Now let's start with our third quarter performance. Net sales were $961 million, a decline of 4%. Gross profit of $332 million increased 5%, while gross margin expanded by 280 basis points to 34.6%. Margin improvement was driven primarily by the successful execution of our Cost and Simplicity Program. The impact of tariffs on our third quarter results was relatively limited, thanks to adequate pre-tariff inventory levels. SG&A expense of $197 million was 2% below the prior year, reflecting continued cost discipline across our businesses. However, given the lower sales, SG&A as a percentage of net sales increased by 30 basis points to 24.5%. Non-GAAP operating income increased 9% to $139 million, and non-GAAP operating margin expanded by 170 basis points to 14.5%.
Non-GAAP adjustments in the garden segment are related to the consolidation of two older distribution facilities in Ontario, California, and Salt Lake City, Utah, into a larger modern facility in Salt Lake City. As a result, we incurred a charge of $2.2 million, most of which is in SG&A. In the Pet segment, non-GAAP adjustments are related to the strategic wind-down of our U.K. operations and moving to a direct export-only model, a Cost and Simplicity initiative we launched in the second quarter. As a result, we incurred an additional charge of $1.7 million, again most of which was in SG&A. Below the line, net interest expense was $9 million compared to $10 million in the prior year, driven by higher interest income as a result of larger cash balances. Other income was $1.1 million compared to $225,000 a year ago.
Non-GAAP net income totaled $98 million, an increase of 11%. We delivered GAAP earnings per share of $1.52, an increase of 28%. Non-GAAP EPS rose 18% to $1.56. These record third-quarter results underscore the strength of our operations and the positive momentum we are maintaining across the business. Adjusted EBITDA was $167 million, an increase of $11 million. Our tax rate for the quarter was 25.1%. Now, I'll provide highlights from our two segments, starting with pet. Net sales for the Pet segment totaled $493 million, down 3%. This was primarily due to our strategic decision to exit lower margin durable products and customers. We accelerated this move at the end of last fiscal year in response to softer demand, heightened pricing pressure, and the onset of new tariffs this year. These headwinds were partially offset by growth in our professional and pet distribution businesses.
Consumable sales remained stable, while durables declined by double-digits. Overall point of sale, or POS, trends were in line with shipments. Importantly, consumables now represent 82% of total pet sales, up from 79% a year ago. This marks a significant increase from approximately 65% four years ago, underscoring our success in building out the higher margin, more resilient consumables portfolio, while thoughtfully reducing our exposure to durables. We held market share overall and delivered gains in several key consumer categories, such as dog chews, flea and tick, and pet bird, as well as in our professional portfolio. E-commerce remained an important part of our channel mix, accounting for 27% of total pet sales, consistent with the prior quarter, albeit slightly below the same period last year. Non-GAAP operating income for the segment came in at $78 million, down 6%, compared to our record third quarter last year.
Non-GAAP operating margin contracted by 60 basis points to 15.8%, largely due to lower volume. Lastly, pet segment adjusted EBITDA totaled $88 million, reflecting a $6 million decline year-over-year. Now moving to garden. Net sales for the garden segment were $468 million, representing a 4% decline. This was primarily driven by the exit of two product lines in our garden third-party distribution business following ownership changes. Additional pressure came from extended periods of cool and rainy weather, which impacted seasonal categories such as controls and live plants. These headwinds were partially offset by continued momentum in our wild bird, fertilizer, and packet seed businesses, each delivering strong broad-based performance across channels. While overall shipments declined, overall POS grew in the low single-digits for the quarter and, consequently, year to date, despite the headwinds noted earlier.
In aggregate, we grew share with gains in several categories, including wild bird, grass seed, packet seed, and fertilizer. Our garden and e-commerce channel continued to gain momentum, achieving yet another quarter of double-digit growth. Results were especially strong in wild bird and grass seed, with sustained category leadership and robust growth across both pure play and omnichannel partners. Non-GAAP operating income for garden rose to $85 million, up $12 million. Non-GAAP operating margin expanded by 310 basis points to 18.2%, reflecting solid productivity gains. Adjusted EBITDA for the segment was $96 million, an improvement of $11 million year-over-year. Let me now address the balance sheet and cash flows. Cash provided by operations was $265 million for the quarter vs $286 million a year ago.
Our continued emphasis on working capital management resulted in an additional $67 million reduction in inventory during the third quarter, spanning both segments of our business. CapEx for the quarter was $14 million, in line with the prior year, reflecting disciplined investments primarily in productivity-enhancing initiatives and essential maintenance projects. Depreciation and amortization of $21 million was 5% below the prior year. During the quarter, we repurchased approximately 1.7 million shares, or $55 million of our stock. As of the quarter end, $46 million remained authorized under the share repurchase program. Cash and cash equivalents at the end of the third quarter were $713 million, an increase of $143 million. Total debt of $1.2 billion was in line with the prior year. We ended the quarter with a gross leverage ratio of 2.9x, in line with the prior year and below our target range of 3x-3.5x.
Factoring in our strong cash position, our net leverage ratio was around 1.2. We continue to have no borrowings under our $750 million credit facility. Turning to our fiscal 2025 outlook, as Niko pointed out, we are reaffirming our guidance for non-GAAP EPS of approximately $2.60 a share for the full fiscal year. With that, we'd like to open the line for questions.