Curaleaf CEO Considers Cannabis Recession Resistant, But Stock Falls After Bigger Loss
Curaleaf Holdings Inc. chief executive Matt Darin said inflation had impacted some of the cannabis company’s customers, but it still managed to beat its revenue target despite a higher quarterly loss. important.
The reality of higher gas and grocery prices caused cannabis consumers to spend less per trip, but they often increased the number of dispensary visits per month during the second trimester, Darin said.
“Most consumers who might have visited twice a month come three times a month but spend a little less each time,” Darin told MarketWatch. “They come in after payday and sometimes spend less by swapping to a cheaper item.”
Meanwhile, purchases of high-end cannabis products remain strong, he said.
“This is the first recession we’ve had with adult cannabis use spread across the country,” Darin said. “There’s no track record of how it played out. What we’re seeing is encouraging: people are investing and spending, but they’re doing it in a slightly different way.
Curaleaf also plans to continue acquiring businesses to grow Curaleaf, but it’s selective, he said.
After the closing bell on Monday, Curaleaf CURLF,
said its second-quarter loss increased to $28.33 million, or 4 cents per share, from a loss of $4.85 million, or one cent per share, in the year-ago quarter.
Revenue increased 8% to $338 million as Curaleaf opened new stores in Arizona, Florida, Maine, Pennsylvania and New Jersey over the past year.
Curaleaf hit the analyst’s target for a loss of 4 cents a share and topped the revenue estimate of $333.8 million, according to FactSet data.
Retail revenue rose 13% to $252 million, but wholesale revenue fell 6% to $84 million amid pricing pressure as the company refocuses its California operations and Colorado.
Curaleaf shares fell 2.5% at midday. The stock is now down 38.3% for the year, compared to a 54.9% decline for ETF AdvisorShares Pure US Cannabis MSOS,
and a loss of 20.2% by the Nasdaq COMP,
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Cowen analyst Vivien Azer reiterated his outperformance rating on Curaleaf and cut his 2023 revenue estimate to $1.64 billion from $1.65 billion based on the impact of cannabis company’s low-margin wholesale.
Curaleaf’s sales growth of 8% over the prior quarter exceeded Cowen’s forecast of 2%.
Gross margin was 250 basis points (2.50 percentage points) above Cowen’s projection of 52% and adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of 25.5% exceeded Cowen’s estimate of 220 basis points.
CEO Darin said the company sees plenty of mergers and acquisitions (M&A) opportunities as it has become more difficult for smaller cannabis companies to secure loans and raise capital in the wake of the surge. interest rates.
On Tuesday, Curaleaf said it agreed to pay an undisclosed sum for a 55% stake in Four 20 Pharma GmbH, a licensed German producer and distributor of medical cannabis with its own line of products.
“Curaleaf was born on M&A and it will be an ongoing opportunity,” Darin said. “We are very selective. Given the distress in the financial markets and the lack of funding in the industry, we see opportunities to be strategic.
Curaleaf on Monday named Ed Kremer as chief financial officer and said Camilo Lyon would be its first chief investment officer. The company has also named Mitch Hara as Chief Strategy Officer, a new role within the company.
Kremer previously worked as Chief Financial Officer of Jushi Holdings Inc. JUSH,
and Lyon most recently worked as a managing director at BTIG LLC; Hara was most recently responsible for mergers and acquisitions and business development at Clever Leaves International.
Darin has been CEO of Curaleaf since February.
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