Edible marijuana products at a Green Thumb Industries dispensary
Daniel Acker/Bloomberg
American cannabis chain Green Thumb Industries delivered the December quarter sales growth that Wall Street had expected, but profit margins were narrower than hoped. The Chicago-based company blamed investments it’s made ahead of New Jersey’s long-awaited start of recreational-weed sales.
Green Thumb (ticker: GTBIF) stock is off 3% in Tuesday morning trading, at $18.57, amid a 0.5% drop in the Nasdaq Composite Index. Green Thumb is the first of the leading U.S. cannabis chains to report its results, ahead of Curaleaf Holdings (CURLF) and Trulieve Cannabis (TCNNF).
Green Thumb’s December-quarter sales rose 4% sequentially and 37% year-over-year, to $244 million. Gross margins were 53%, down from 55% in the September quarter, and 57% in the December 2020 quarter. Even so, the company’s earnings before interest, taxes and depreciation—and adjusted for stock compensation and one-time costs—grew to $76 million, from $65 million in the year-ago quarter. Green Thumb has been one of the few cannabis chains that’s reported net profits, and in the December 2021 quarter its net income was $23 million, or 10 cents a share. For the 2021 year, Green Thumb earned 34 cents a share on sales of $894 million.
CEO Ben Kovler told Barron’s that Green Thumb’s narrowed margins reflected some price competition in older markets such as Illinois and Pennsylvania, as well as his company’s investment ahead of recreational sales in New Jersey and Connecticut. Those state governments have taken longer to green light adult recreational sales than the industry, and investors, had expected.
In a mid-February note, Needham analyst Matt McGinley said that New Jersey will be the single biggest driver of sales growth for Green Thumb this year, with better profit margins than states like Illinois. He rates the stock at Buy, with a $36 price target.
Green Thumb CEO Kovler expects that New Jersey will finally allow adult-use sales this year, but has given up trying to forecast decisions of state governments. Still, he says his confidence in the pent-up demand was shown by Green Thumb’s capital investment of $228 million in 2021, to build new supply capacity.
“The good news,” he said, “Is that as soon as New Jersey turns on, we’ll not have to spend a dollar in additional sales, marketing and administration expense.”
Write to Bill Alpert at william.alpert@barrons.com
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