Trulieve Closing Down Operations
We are removing Trulieve (TCNNF) from Hedgeye Cannabis's Best Idea Long List.
This move by the company is further proof that the current industry structure is broken!
Yesterday, Trulieve announced additional measures to preserve cash and improve financial performance. Trulieve will be closing its retail location in Grover Beach, California. This closure follows the exit of select California retail assets last year in Palm Springs and Venice. In addition, the Company has decided to wind down its operations in Massachusetts. Dispensaries in Framingham, Northampton, and Worcester will close on June 30, 2023. The Company expects to cease Massachusetts operations by the end of 2023. “These difficult but necessary measures are part of ongoing efforts to bolster business resilience and our commitment to cash preservation as we continue to focus on our business strategy of going deep in our core markets and jettisoning non-contributive assets,” said Chief Executive Officer Kim Rivers.“We remain fully confident in our strategic position and the long-term prospects for the industry.” In 2022, Truleives already started to close down some dispensaries in California, exit the Nevada wholesale market, and drawback product capacity in several states. It is a game of survival at this point, and either Trulieve is not very confident with where their balance sheet is at, or they expect the U.S. cannabis headwinds to persist for some time. Whichever way you look at it, it is not a good sign for Truleive, which is why we are moving it to the sidelines. The stock was down 5% on the news.
CRONOS EXITS U.S. HEMP BUSINESS
Sum of the part at a significant discount to its asset value
On Wednesday, Cronos announced plans to divest its U.S. hemp-derived CBD-focused operations by the end of June to cut costs. The cannabis producer said the decision improves its cash flow and positions it to enter the US cannabis market should regulations on recreational cannabis change. "We believe that one day, the U.S. will be one of the most important cannabis markets in the world. But we also believe our resources are best spent on staying laser-focused on becoming cash flow positive by driving cost savings and process efficiencies for our borderless adult-use products. We have the best balance sheet in the cannabis industry, with $836 million in cash and short-term investments and zero debt as of March 31, 2023. Achieving our goal to generate positive cash flow in 2024 will advance our industry-leading cash balance and put us in the best position to win in the U.S," chief executive Mike Gorenstein said in a release.
Maryland CANNABIS TRENDS
In the month of April, Maryland recorded ~$38M in cannabis sales, which represents a sequential decline of 5.1% and a YoY decline of 13.8%. Unit volumes in the month were down 2.4% sequentially and up 3.4% YoY. The average price per unit was down 2.7% sequentially and down 16.7% YoY.
