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Cannabis companies are trading sharply lower on Thursday after Canadian Licensed Producer Canopy Growth (CGC) missed Street forecasts with its Q3 FY23 results and announced several restructuring initiatives including layoffs.
Notable decliners include Columbia Care (OTCQX:CCHWF), Neptune Wellness (NEPT), MedMen Enterprises (OTCQB:MMNFF), HEXO Corp. (HEXO), Clever Leaves Holdings (CLVR), Flora Growth (FLGC), Aurora Cannabis (ACB) and SNDL (SNDL).
Announcing plans to close multiple production facilities and move to a third-party sourcing model, Canopy (CGC) said it is pursuing an asset-light model in Canada.
The company said that the cost-cutting initiatives are expected to reduce its staff count by approximately 60% and generate C$140M – C$160M in savings for the cost of goods sold and SG&A expenses.
The announcement came as Canopy (CGC) reported C$113.3M in revenue for the quarter, with a ~27% YoY decline. Meanwhile, its net loss widened ~131% YoY C$266.7M as gross margin turned negative at ~2% compared to a positive ~7% margin in the prior year period.
Canopy’s (CGC) decision to exit certain operations follows a similar move by its U.S. rival Curaleaf Holdings (OTCPK:CURLF) which in January announced the closure of most of its operations in California, Colorado, and Oregon.
However, Seeking Alpha contributor Cannabis Growth Investor remained bullish on Curaleaf (OTCPK:CURLF) at the time, noting, “I am hopeful that such actions may help bolster the bottom line.”
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