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Prestige Consumer Strong on E-commerce & Cost-Saving Plans

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Prestige Consumer Healthcare Inc. (PBH - Free Report) appears to be in decent shape, thanks to its efficient, strategic endeavors. Notably, the company has been on-track with completely transforming its business and focusing solely on healthcare. Also, its e-commerce investments have been yielding results. Moreover, the company’s cost-containment efforts are noteworthy.

The impact of these initiatives and gains from the pandemic-led demand in some categories were witnessed in the first quarter of fiscal 2021, wherein both top and bottom lines beat the Zacks Consensus Estimate and the latter also improved year over year. This marked the company’s sixth straight beat on a combined basis. In the second quarter of fiscal 2021, the bottom line is expected to be at least 70 cents, driven by cost-management policies. This suggests growth from 68 cents reported in the year-ago period.

Markedly, shares of this Zacks Rank #2 (Buy) company have gained 7.5% in a year against the industry’s decline of 5.5%. Additionally, the consensus mark for earnings in the second quarter and fiscal 2021 has gone up from 70 cents to 72 cents and from $2.99 to $3.15, respectively, over the past 60 days. Let’s delve deeper. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

E-Commerce Efforts on Track

The company has been making e-commerce investments for a while now, which continued to yield results in the first quarter of fiscal 2021. Markedly, the e-commerce business grew triple digits in the quarter and now forms more than 10% of total retail sales. With more consumers shifting to the online mode of shopping, especially amid the pandemic-led social distancing, the e-commerce channel is likely to remain strong. Apart from this, the company has been gaining on continued investments in brands.

Focus on Healthcare Bodes Well

Prestige Consumer is on track with completely transforming its business and thereby focusing solely on healthcare. Well, management already commenced initiatives to achieve the target by changing its corporate name to Prestige Consumer Healthcare, Inc. during the second quarter of fiscal 2019. This move is an important milestone for the company that prides itself on having a strong portfolio of healthcare brands. Moreover, management stated that focusing on areas that have greater growth prospects, such as healthcare, will aid the company in utilizing resources efficiently.

Cost-Cutting Efforts, Impressive Q1 Results

Adjusted earnings of 86 cents per share surpassed the Zacks Consensus Estimate of 70 cents in the first quarter of fiscal 2021. Results were backed by reduced operating expenses and interest costs. Quarterly earnings improved 32.3% year over year. Though sales were hurt by lower consumption for certain product categories amid the pandemic, the company benefited from robust consumption trends in most products and higher retailer orders. Also, gross margin and EBITDA margin improved year over year.

In fact, the company has been witnessing improved gross margins for a while now. In the fiscal first quarter, the company’s gross margin expanded 70 basis points (bps) to 58.4%. Early gains from transitioning to a new third-party logistics provider aided gross margin growth. Further, we note that the company saw a decline in Advertising & Promotion (A&P) costs (as a percentage of revenues) in the first quarter on the back of lower spending amid the crisis.

In the second quarter, A&P costs, as a percentage of revenues, are anticipated to be about 15%, down from 16.2% in the year-ago period. Also, G&A expenses in the quarter under review came in at $20 million or a little less than 9% of revenues, which declined year over year, thanks to robust cost management and reduced costs amid the pandemic.

3 More Solid Consumer Discretionary Stocks

Central Garden & Pet (CENT - Free Report) , which currently carries a Zacks Rank #1, has a trailing four-quarter earnings surprise of 5.1%, on average.

Spectrum Brands (SPB - Free Report) , with a Zacks Rank #1, has a long-term earnings growth rate of 16.3%.

Crocs (CROX - Free Report) , also with a Zacks Rank #1, has a long-term earnings growth rate of 15%.

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