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KushCo Pushes Hard Into Retail

By Eric Volkman - Updated Oct 10, 2019 at 7:08PM

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The company is teaming with Sentia Wellness to get into the CBD retail game.

KushCo Holdings (KSHB) is branching out into the retail sector.

The company announced that it is partnering with privately held Sentia Wellness for its newly launched retail services division. This business unit will be centered around Sentia's Social CBD brand and, according to KushCo, will be "focused on CBD mass distribution, industry education, and compliance."

Marijuana leaf atop a 100 dollar bill.

Image source: Getty Images.

Sentia is a very young company, having been founded earlier this year by former executives of Cura Partners, a vaporizer manufacturer that was acquired by Curaleaf Holdings (CURLF -2.38%) in May for $950 million.

Sentia has been busy with the launch of the Social CBD line, which is a fairly wide range of cannabidiol (CBD) products and accessories. These goods aren't limited only to humans; the brand also features CBD drops for pets. Sentia will utilize KushCo's relationship with sales and marketing agency C.A. Fortune to help it sell the brand "across a variety of retail channels."

Sentia will also avail itself of KushCo's distribution capabilities. KushCo did not provide financial details about the arrangement between the two companies.

The venture into retail is a new path for KushCo Holdings. The company's core activity is the manufacture and supply of packaging and other supplemental goods for the cannabis industry.

In the press release heralding the new partnership, KushCo said it is "the first of many."

It clearly has high hopes for this one. It wrote that Sentia "appreciate[s] the need to partner with an industry leader like KushCo that has developed a keen understanding of the regulatory and compliance challenges impacting the CBD industry, along with having a robust distribution network to scale nationwide and turn Social CBD into a household name."

KushCo could use a win. As with other marijuana stocks, it has struggled on the bottom line and its share price has fallen precipitously.

The company is not profitable, despite significant improvements in revenue lately. In KushCo's most recently reported quarter, its top line more than tripled on a year-over-year basis (to almost $42 million). However, much of this was due to acquisitions, and both operating and net losses were deeper -- the former significantly so.

Judging by the movement of the stock, it seems investors aren't enthused about the move into retail. The share price is down by over 10% since market close on Tuesday, the day KushCo made its announcement.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends KushCo Holdings. The Motley Fool has a disclosure policy.

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