Canopy Growth’s loss bigger than expected; shares dip 20%
Canopy Growth Corp on Friday reported a bigger-than-expected quarterly loss as its recreational cannabis business lost market share due to delayed product launches.
The company also withdrew its target of becoming EBITDA positive by the end of fiscal 2022 due to uncertainties related to the coronavirus crisis, sending its U.S.-listed shares down more than 20 per cent and dragging down other weed stocks. In Toronto, its shares were down 21 per cent in mid-afternoon trading.
“Canopy Growth expects Fiscal 2021 to be a transition year as the Company resets its strategic focus, rolls out a new organizational design, and implements a comprehensive operational and supply chain productivity program,” the Smiths Falls, Ont.-based company said in a statement. “Depending on the impacts of COVID-19, Canopy Growth may provide new metrics by which to measure the Company’s performance in the second half of fiscal 2021.”
The COVID-19 pandemic was expected to give cannabis companies a boost as customers were seen stockpiling pot brownies and other products to cope with lockdowns.
But delays in Canopy ’s launch of “2.0 products,” which include the highly sought brownies, beverages and vapes, hit the company’s recreational revenue in the fourth quarter and pulled down overall revenue by 13 per cent compared with the third quarter.
Added to that, the company had to temporarily shut most of its retail stores in March and is in the middle of a restructuring program that has included divestitures and layoffs in hopes of becoming profitable.
Canopy’s recreational market share declined from the low 20s to high teens, Chief Financial Officer Mike Lee told analysts.
“Simply put, we missed opportunities,” he said.
Jefferies analysts said Canopy has ‘much more work to do’ and called it worrying that executives spoke of a need to ‘understand what customers want’.
“Probably the worst thing to hear from a market share leader,” the analysts wrote in a note. Reuters with Financial Post