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  "documentTitle": "Prestige Consumer Healthcare Inc. (PBH)",
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  "authorName": "Ben Axler",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2020-06-30 00:00:00",
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      "kind": "callout",
      "text": "While management hypes up e-commerce growth, the economics are in-line with brick-and-mortar and sales cannibalize traditional channels",
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      "text": "Contrasting management quotes with analyst findings",
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      "text": "As traditional distribution channels became saturated, PBH began to sell direct to consumers (B2C) and through online distribution channels such as Amazon. Management as touted its growing success in e-commerce which accounts for 5% of sales. We find PBH will face similar struggles as retail. While this reduces the cost of a middleman, overall margins do not improve significantly due to new additional costs such as shipping and administrative. Although still a small percentage of sales, our research shows that PBH faces the same challenges with Amazon and online retail.",
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      "text": "During the fourth quarter, we continued to benefit from our ongoing investments and focus on ecommerce. Our e-comm business grew over 60% in the quarter as we benefited from consumers shifting to online purchasing. Notably, our consumption growth was about 7% driven by these factors for the quarter after previously trending at about 2% prior to March, which was consistent with our expectations for the year.",
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      "text": "In 2016 there was a big push to go to B to C, so to go with a third-party logistic company that will do the fulfillment. They started to diversify their channels because the traditional channels were kind of getting a little bit saturated. So they tried B2C, then health food premium stores, then direct selling to consumers. For Amazon, our margins would be slightly better or the same. We don't have the middleman, but when we sell direct to the consumer, the cost of the transaction goes a bit higher. For example, shipping. Shipping and returns you have to account for. The damage allowance from let's say Walmart is significantly lower than direct customers. Shipping and handling was an issue and that's why we went with a third-party logistic company. We had more markets and newer channels, but then the administrative costs or the other costs, the hidden cost of shipping, handling and the logistics would rise a little bit. So we had to come up with creative ways to find of a cushion that gap.",
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      "kind": "quote",
      "text": "The financial profile of our online business is pretty consistent with brick-and-mortar. So although we have different tactics, the overall cost of connecting and winning with consumers is fairly similar for us.",
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      "kind": "quote",
      "text": "\"During the fourth quarter, we continued to benefit from our ongoing investments and focus on ecommerce. Our e-comm business grew over 60% in the quarter as we benefited from consumers shifting to online purchasing.\" — Christine Sacco, CFO, Q4 2020 Call. \"The financial profile of our online business is pretty consistent with brick-and-mortar. So although we have different tactics, the overall cost of connecting and winning with consumers is fairly similar for us.\" — Ronald Lombardi, Q4 2020 Call. \"For Amazon, our margins would be slightly better or the same. We don't have the middleman, but when we sell direct to the consumer, the cost of the transaction goes a bit higher. For example, shipping.\" — Former PBH Employee.",
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      "kind": "title",
      "text": "Shift To E-Commerce",
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