Canopy Growth reported a $374.6M loss for Q2 2020 (ending September 30), up 13% from its Q2 2019 loss of $330.6M.
NewsWire
- Net revenue, which was $90.5M last quarter, declined 15% to $76M—while the average analyst estimate for revenue in the quarter was $107M.
MJ Biz Daily, CBC Business - Interim CEO Mark Zekulin withdrew his guidance of $250M in revenue by Q4 (ending in March), calling it “increasingly unlikely.”
Zekulin said, “The inability of the Ontario government to license retail stores, right off the bat, has resulted in half of the expected market in Canada simply not existing.”
- He noted LPs should accept responsibility for the initial supply shortage that forced Ontario to shut down REC retail licensing, but concluded, “The fact is: there are not enough stores [in Ontario…] and the inability to get more stores rolled out is dramatically hurting the sector.”
Bloomberg - Canopy president Rade Kovacevic said, “The Canadian market is 6-12 months behind where we thought it would be because of (slow) store openings.”
Twitter—Matt Lamers
Canopy CFO Mike Lee said the company assumes Ontario will begin licensing 40 new stores per month beginning in January.
Twitter—David George-Cosh
- Saying the company believes the province could support 1,000 retailers, Canopy predicted “The number of stores serving [Ontario] consumers could approach 600 within 12 to 18 months.”
Twitter—Matt Lamers - BMO Capital Markets analyst Tamy Chen said Ontario could not possibly open enough stores in the next year to accommodate the sector’s expected production.
Bloomberg
Canopy took “a restructuring charge of $32.7M for returns, return provisions, and pricing allowances primarily related to its softgel & oil portfolio”—two products unpopular with consumers.
- During the last quarterly earnings report in August, Canopy took an $8M gross revenue adjustment on “oversupply of certain oil and gel-cap formats in certain markets.” Retailers reported they were “just not selling.”
Financial Post - Responding to this quarter’s news, the Financial Post‘s Vanmala Subramaniam said, “Those were disaster products for Canopy.”
Twitter—Vanmala Subramaniam - Zekulin connected low oils and gelcap sales to the shortage of stores, insisting, “There is still interest in soft gels and oils.”
Financial Post
Inventory writedowns could become more widespread as wholesale prices decline and LPs that estimated the value of their “biological assets” at far greater than the present selling price are forced to adjust.
Financial Post
