DEF: Central Garden & Pet Sets 2026 Annual Meeting Agenda

Central Garden & Pet Company announces its 2026 Annual Meeting of Shareholders to vote on director elections, auditor ratification, and executive compensation, following a fiscal year with mixed financial results.

Summary

• The Annual Meeting of Shareholders will be held virtually on Wednesday, February 11, 2026, at 10:30 A.M. Pacific Time.
• Shareholders of record as of 5:00 P.M. Pacific Time, December 15, 2025, are entitled to vote.
• Key proposals include the election of nine directors, ratification of Deloitte & Touche LLP as the independent registered public accounting firm for fiscal year ending September 26, 2026, and an advisory vote on named executive officer compensation.
• The Board of Directors unanimously recommends voting FOR all three proposals.
• Fiscal 2025 net sales decreased by 2.2% to $3,129.1 million, while GAAP net income increased 50.8% to $162.8 million, and diluted earnings per share rose to $2.55 from $1.62 in the prior year.
• Non-GAAP net income for fiscal 2025 was $174.2 million, or $2.73 per diluted share, compared to $142.4 million, or $2.13 per diluted share, in fiscal 2024.
• Gross margin in fiscal 2025 was 31.9% on a GAAP basis and 32.1% on a non-GAAP basis, exceeding the Management Incentive Plan (MIP) target of 31.5%.
• Company EBIT for fiscal 2025 was $250.0 million on a GAAP basis and $265.0 million on a non-GAAP basis, slightly above the MIP target of $259.2 million.
• Pet segment net sales were $1,802.0 million (MIP target $1,840.4 million) and Garden segment net sales were $1,327.1 million (MIP target $1,298.6 million).
• Nicholas Lahanas's base salary as CEO increased 62% to $900,000, and Bradley G. Smith's base salary as CFO increased 22% to $450,000, effective September 29, 2024.
• Lisa Coleman is not standing for re-election as a director; Randal D. Lewis joined the Board in December 2024.

Sentiment

Score: 7

Explanation: The company demonstrated strong growth in net income and EPS despite a decline in net sales, indicating effective cost management and operational optimization. Gross margin and overall EBIT (non-GAAP) exceeded internal targets. However, the overall sales decline and underperformance in total shareholder return compared to its peer group present areas for concern. The robust corporate governance and executive compensation alignment are positive.

Positives

• Net income increased significantly by 50.8% to $162.8 million in fiscal 2025.
• Diluted EPS rose to $2.55 in fiscal 2025 from $1.62 in the prior year, indicating improved profitability.
• Non-GAAP net income and diluted EPS also showed strong growth, reaching $174.2 million and $2.73 per share, respectively.
• Gross margin for fiscal 2025, both GAAP (31.9%) and non-GAAP (32.1%), exceeded the Management Incentive Plan (MIP) target of 31.5%.
• Company EBIT (non-GAAP) of $265.0 million for fiscal 2025 slightly surpassed the MIP target of $259.2 million.
• The Garden segment's net sales of $1,327.1 million exceeded its MIP target of $1,298.6 million, and its non-GAAP EBIT of $147.4 million also exceeded its MIP target of $141.4 million.
• Executive compensation is designed with a significant portion (47% to 80% in fiscal 2025) considered 'at risk' and tied to annual financial performance and long-term stock price performance, aligning with shareholder interests.
• The Board maintains strong independent oversight, with a majority of independent directors, a lead independent director, and independent Audit and Compensation Committees.
• A Compensation Recovery Policy (Clawback Policy) was adopted to comply with SEC rules, allowing for recovery of incentive compensation in cases of financial restatement or executive misconduct.

Negatives

• Net sales for fiscal 2025 decreased by 2.2% to $3,129.1 million, missing the MIP target of $3,139.0 million.
• The Pet segment's net sales of $1,802.0 million missed its MIP target of $1,840.4 million.
• The Pet segment's non-GAAP EBIT of $225.7 million missed its MIP target of $221.5 million.
• Director Christopher T. Metz attended fewer than 75% of Board and committee meetings due to conflicts.
• John R. Ranelli had one late Section 16(a) report filing during the period from September 29, 2024, to September 27, 2025.

Risks

• The company faces operational, economic, financial, legal, regulatory, and competitive risks.
• Heightened macroeconomic uncertainties and tariffs continue to impact the business environment.
• Changing consumer behavior, including ongoing expansion in e-commerce, is offset by softer demand reflecting the impact of inflation and pressure on consumer confidence.

Future Outlook

The company expects to continue increasing its focus on e-commerce to drive future growth, optimize operations, and deliver growth in non-GAAP earnings per share, alongside continued gross margin expansion and strong operating cash flow. The Compensation Committee will continuously analyze and adjust executive compensation policies to reflect the company's performance and competitive needs. Fiscal 2025 bonuses for named executive officers are anticipated to be determined by February 2026, and the next advisory vote on executive compensation is scheduled for the Annual Meeting in February 2029.

Management Comments

• Mailing or emailing the Notice and posting other materials on the Internet allows the company to provide shareholders with necessary information while lowering delivery costs and reducing environmental impact.
• The Board believes that separating the roles of Chairman and Chief Executive Officer is appropriate given the distinct responsibilities of each role.
• The Compensation Committee believes its compensation program is strongly aligned with the interests of the company's shareholders.
• The executive compensation program has been instrumental in retaining senior executives and aligning their interests with those of the company's shareholders.
• Base salary is viewed as a primary indicator of the market value needed to attract and retain executives with the required skills and expertise.
• Annual bonuses are considered a means of rewarding job performance, while equity grants link long-term compensation to the company's long-term financial performance and serve as retention devices.
• The Compensation Committee believes in pay for performance and that a substantial portion of pay at risk is the most effective means of aligning executive incentives with shareholders' interests.
• The company's compensation program encourages executive officers to take appropriate risks aimed at improving financial success and creating long-term shareholder value, aligning short-term cash incentives with competitive practices, and does not promote inappropriate risk taking.

Industry Context

The company operates in the distinct pet supplies and lawn and garden consumables industries, complemented by a substantial third-party logistics business. It navigates a challenging macroeconomic environment characterized by uncertainties, tariffs, and evolving consumer behaviors, including the growth of e-commerce alongside softer demand influenced by inflation. The company benchmarks its performance and compensation against a peer group of consumer products companies, including Scotts Miracle-Gro Co., Spectrum Brands Holdings Inc., J.M. Smucker Co., Church & Dwight Co., Helen of Troy Ltd., Newell Brands Inc., The Clorox Company, Edgewell Personal Care Co., and Energizer Holdings Inc., indicating its positioning within a broader household and consumer goods sector.

Comparison to Industry Standards

• The company's Total Shareholder Return (TSR) of $112.32 for fiscal 2025 underperformed the Peer Group TSR of $121.25, based on the Dow Jones U.S. Non-durable Household Products Index.
• The peer group used for Performance Share Unit (PSU) awards includes Scotts Miracle-Gro Co., Spectrum Brands Holdings Inc., J.M. Smucker Co., Church & Dwight Co., Helen of Troy Ltd., Newell Brands Inc., The Clorox Company, Edgewell Personal Care Co., and Energizer Holdings Inc., reflecting a broad consumer products comparison.
• The Compensation Committee periodically uses surveys and reports from compensation consulting firms to understand compensation levels and pay structure at other consumer products companies, indicating a focus on competitive compensation practices.

Management Changes

Corporate Governance

Related Party Transactions

• During fiscal 2025, CSA (a joint venture where the company holds a 50% ownership interest) reimbursed Diamond Fork Enterprises, LLC (80% owned by Chairman William E. Brown) $266,000 for royalties and IP maintenance expenses related to animal and EPA rights.
• A division of Pennington Seed, a company subsidiary, purchased approximately $1.3 million of feed products from Wildlife Foods, LLC, a company owned by Director Brooks M. Pennington III's son-in-law, during the fiscal year ended September 27, 2025.

Stakeholder Impact

• **Shareholders**: Will vote on key governance matters and are impacted by the company's mixed financial performance (sales decline vs. profit growth), executive compensation structure, and robust corporate governance practices.
• **Employees**: The executive compensation program aims to recruit, retain, and incentivize high-caliber executives. The median employee's annual total compensation was $49,985 in fiscal 2025.
• **Customers**: The company's continued focus on e-commerce and optimization of operations may impact product availability and service delivery in the pet and garden segments.
• **Management**: Executive officers' compensation is directly tied to company performance, with significant salary increases for the new CEO and CFO. They are subject to strict stock ownership requirements, a clawback policy, and insider trading restrictions.
• **Creditors/Suppliers**: Related party transactions with Diamond Fork and Wildlife Foods indicate ongoing business relationships that could impact these stakeholders.

Next Steps

• Shareholders will participate in the Annual Meeting on February 11, 2026, to vote on director elections, auditor ratification, and executive compensation.
• Fiscal 2025 bonuses for named executive officers are expected to be determined by February 2026, with results to be reported in a Form 8-K.
• The next advisory vote on executive compensation will be held at the Annual Meeting of Shareholders in February 2029.
• Shareholders intending to present proposals for the February 2027 annual meeting must submit them by August 24, 2026, for inclusion in the proxy statement, or by November 7, 2026, for presentation at the meeting without inclusion.

Key Dates

Recommendation

The company's fiscal 2025 results present a mixed picture: a 2.2% decline in net sales indicates ongoing market challenges, but a significant 50.8% increase in GAAP net income and strong non-GAAP EPS growth demonstrate effective cost management and operational efficiency. Gross margin and overall EBIT (non-GAAP) exceeded internal targets, which is positive. However, the Pet segment underperformed its sales and EBIT targets, and the company's Total Shareholder Return lagged its peer group. While executive compensation is well-aligned with performance incentives and corporate governance appears robust, the sales contraction is a concern. Given these offsetting factors, a seasoned investor would likely maintain their current position ("hold") to observe if the company can return to top-line growth while sustaining its improved profitability and if its TSR performance can align more closely with its industry peers.

Keywords

Central Garden & Pet Company, Proxy Statement, Annual Meeting, Corporate Governance, Executive Compensation, Director Election, Financial Performance, Net Sales, Net Income, EPS, Gross Margin, EBIT, Pet Supplies, Lawn & Garden, Shareholder Vote, Risk Oversight, Related Party Transactions