We delivered a record second quarter and a record first half with clear improvement across the board, higher sales, expanded operating margins, and stronger earnings per share versus last year. With that foundation in place, our focus is squarely on growth and disciplined capital allocation. Our diversified portfolio, operational flexibility, and disciplined approach to cost management and capital allocation position us well to deliver profitable growth as the macro backdrop continues to evolve. They are gaining traction, positioning us to drive both growth and margin expansion.
We're taking a disciplined, value-driven approach focused on high quality, margin accretive opportunities that strengthen our portfolio. On the joint venture, as expected, it will reduce reported revenue in the second half by a low-teens %, but with minimal impact on earnings, given the lower margin profile of that business. Based on our performance and outlook, we are maintaining our guidance for fiscal 2026 non-GAAP diluted EPS of $2.70 or better. As always, this guidance excludes the impact of future acquisitions, divestitures, or restructuring actions.
We've built a strong foundation, we're moving forward with focus, discipline, and a confidence in our ability to deliver long-term growth and value. Gross profit increased to $300 million from $273 million, with gross margin improving by 30 basis points to 33.1%. As a percentage of sales, SG&A was 20.5%, down from 21.6%, reflecting the improved sales leverage, prudent cost management, and ongoing simplification of the organization while continuing to reinvest in key growth initiatives. Operating income was $114 million compared with $93 million, and operating margin was 12.6% compared with 11.2%.
| Metric | Period | Current guidance |
|---|---|---|
| Non-GAAP diluted EPS | FY2026 | $2.70 or better (Maintained) |
| CapEx | FY2026 | Approximately $50 million to $60 million (Unchanged) |
| Phillips JV revenue impact | H2 FY2026 | Reduces reported revenue by a low-teens percentage |
| Phillips JV earnings impact | H2 FY2026 | Conservatively $0.03 to $0.05 per share dilutive |
| Metric | YoY | Note |
|---|---|---|
| Net sales | +9% to $906 million | Growth across both segments and anticipated shift of shipments from Q1 into Q2 |
| Gross margin | +30 bps to 33.1% | Productivity gains and favorable pet mix; prior year included a U.K. wind-down inventory charge |
| Operating income | +$21 million to $114 million (margin 12.6% vs 11.2%) | Sales leverage and ongoing simplification |
| Net income | +$15 million to $79 million | Higher operating income |
| Diluted EPS | +$0.13 to $1.28 (record Q2) | Strong execution and underlying business strength |
| Adjusted EBITDA | +$16 million to $139 million (margin 15.4% vs 14.8%) | Sales growth and margin improvement |
| Pet segment net sales | +5% to $477 million | Core consumables strength and expected cushion order shift from Q1 into Q2 |
| Pet segment operating margin | 16.3% vs 13.4% | Sales leverage, mix improvement, portfolio optimization, and execution |
| Garden segment net sales | +13% to $425 million | Timing of initial retailer shipments, low retailer on-hand inventories, and distribution gains |
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Shipment timing | Sales slipped from Q1 into Q2 | Q2 captured the shifted shipments; first-half view smooths the noise (H1 sales +2%) | Normalized |
| Pet category recovery | Stabilized, near bottom | First segment growth in several quarters; consumables up mid-single digits ex-distribution | Improving |
| Simplification / distribution | Owned full distribution business | Formed Phillips JV retaining 20%; exiting complexity to focus on branded portfolio | Streamlining |
| Garden season / sell-through | Cautiously optimistic going in | Strong March and April consumption where weather favorable; May still pivotal | Improving |
| Consumer behavior | Value-seeking | Still value- and performance-seeking; channel shift to mass, club, e-commerce and private label | Stable |
| M&A environment | Several discussions, picking up | Conversations more sincere, processes launching with quality assets, several active discussions | Improving |