Alcanna Reports First Quarter 7.9% Growth in Same Store Liquor Sales and 7.5% Gain in Gross Margin Dollars From the Liquor Di...
May 17 2021 - 7:58PM
Alcanna Inc. (the “Company” or “Alcanna”) (TSX: CLIQ) today
reported its financial results for the three months ended March 31,
2021.
First Quarter Financial Results and
Business Update
In Q1 2021, Alcanna’s liquor division continued
the strong performance achieved in 2020. Same-store liquor sales
from continuing operations rose by 7.9% and gross margin dollars
from the liquor division from continuing operations increased 7.5%
to $27.7 million from $25.8 million.
- The Company
believes these increases are primarily a result of: (i) the change
in pricing strategy that was implemented in 2019 and 2020, and has
continued into 2021, which was designed to regain lost market share
and grow the customer base; and (ii) shifting customer consumption
habits due to more people dining and entertaining at home and
continuing to stay away from on-premise liquor establishments
(restaurants, bars, lounges, sports venues, etc.). The Company
believes these new behaviour patterns have become entrenched in
people’s lifestyle choices and will continue to some extent even
after the COVID-19 pandemic subsides.
- The favourable
result to last year is accentuated considering the significant
increase in customer demand that was observed in the last three
weeks of March 2020 as customers began stockpiling product at the
start of the COVID-19 pandemic.
- Despite the
fact that the Company has exited thirty-one (31) stores in Alberta
during the past fifteen (15) months as a strategy to sell or close
lower-revenue/under-performing convenience-format liquor stores in
Alberta, total liquor sales from continuing operations in the first
quarter still rose to $123.8 million from $122.6 million in
2020.
Since the March 22, 2021 transaction which spun
out Alcanna’s cannabis business into a separate publicly traded
company – Nova Cannabis Inc. (“Nova”) (TSXV: NOVC)
– the Company’s participation in cannabis retail is now indirect
through its approximately 63% ownership of Nova.
- Nova’s strategy
is to continue to be one of Canada’s largest and fastest growing
cannabis retailers by delivering compelling value to cannabis
consumers – and encouraging greater migration from the illicit
market. Nova’s main banner, Value Buds, offers discount prices on a
wide range of cannabis products from value to premium.
- Nova currently
has fifty-three (53) cannabis retail locations in Alberta,
Saskatchewan and Ontario, with a further thirty (30) locations
under development/construction (Ontario: nineteen (19); Alberta:
eleven (11)), the majority of which are expected to be ready to
open in the second half of 2021, subject to receiving government
licences.
- To date in
2021, eighteen (18) locations have been converted from Nova
Cannabis to Value Buds. In recent weeks, these Value Buds locations
have seen, on average, transaction count and sales increases of in
excess of 120% compared to the period before conversion. These
increases were realized at a gross margin as a percentage of sales
of approximately 19% compared to approximately 32% in the period
before conversion. As Nova continues to increase the number of
Value Buds locations and introduce this banner to more customers,
it anticipates that gross margin as a percentage of sales will
blend out to be approximately 12% to 15% in the second half of 2021
and Nova anticipates that the sales increases already realized to
date will continue and possibly accelerate.
- For accounting
purposes, the transaction completed between Alcanna and YSS Corp.
constituted a reverse takeover of YSS Corp. by Alcanna, and
therefore Alcanna has continued to consolidate the financial
results of Nova, including the financial results from the former
YSS Corp. operations from March 22, 2021 to March 31, 2021.
- Total cannabis
store sales for Q1 2021 rose 17.2% to $18.4 million from $15.7
million in the prior year. Total gross margin dollars decreased
8.0% to $4.8 million from $5.2 million and gross margin as a
percent of sales was 26.0% for the period (Q1 2020 – 33.1%). The
decrease in gross margin is primarily attributable to the strategic
lowering of gross margin stores in support of Nova’s growth
strategy discussed earlier.
The Company’s total operating profit before
depreciation, remeasurements and provisions for Q1 2021 decreased
17.7% to $3.2 million from $3.9 million in the prior year, and the
net loss from continuing operations for Q1 2021 rose to $9.5
million, compared to $8.4 million in the prior year. Both declines
were primarily attributable to the expenses related to the
transaction to spin off the Company’s cannabis business in Q1
2021.
The Company’s condensed interim consolidated
financial statements and management’s discussion and analysis
(“MD&A”) for the three months ended March 31, 2021 will be
available in the “Investor Centre – Financial Reports” section of
the Company’s website at www.alcanna.com and will be filed on SEDAR
and available at www.sedar.com.
FINANCIAL RESULTS
|
Three months ended March 31, |
|
(In thousands of Canadian dollars except per share amounts,
unaudited) |
2021$ |
|
2020$ |
|
|
|
(Restated)(i) |
|
Sales |
142,210 |
|
138,270 |
|
Operating profit before depreciation, remeasurements and
provisions |
3,207 |
|
3,898 |
|
Net
loss from continuing operations |
(9,463 |
) |
(8,440 |
) |
Basic and diluted loss per share from continuing operations |
(0.24 |
) |
(0.21 |
) |
i) The financial results for the three months
ended March 31, 2020 have been restated to exclude the results of
the Company’s discontinued operations comprised of the British
Columbia operations, which have been disposed as part of the
Company’s coordinated plan to exit the British Columbia
convenience-format retail liquor store business.
CONFERENCE CALL
Management of Alcanna and Nova, Alcanna’s
majority owned subsidiary, will conduct a joint conference call on
May 18, 2021 at 12:00p.m. ET (10:00a.m. MT) to discuss their
respective financial results.
To participate, please dial (416) 406-0743 or
(800) 806-5484 and use the required participant access code:
3518326#. The playback will be made available approximately four
hours after the event at (905) 694-9451 or (800) 408-3053, required
access code: 1361632#.
ABOUT ALCANNA INC.
Alcanna is one of the largest private sector
retailers of alcohol in North America and the largest in Canada by
number of stores – operating in excess of 170 locations in Alberta
and British Columbia. Nova operates 53 cannabis retail stores in
Alberta, Ontario, and Saskatchewan.
Alcanna's common shares trade on the Toronto
Stock Exchange under the symbol "CLIQ" and Nova’s common shares
trade on the TSX Venture Exchange under the symbol “NOVC”.
Additional information about Alcanna Inc. is
available at www.sedar.com and the Company’s website at
www.alcanna.com.
FORWARD-LOOKING STATEMENTS
This news release contains forward-looking
statements or information (collectively "forward-looking
statements") within the meaning of applicable securities
legislation. Forward-looking statements are typically identified by
words such as “continue”, “anticipate”, "will", "should", “plan”,
“intention”, and similar words suggesting future events or future
performance. All statements and information other than statements
of historical fact contained in this news release are
forward-looking statements. In particular, this news release
contains forward-looking statements pertaining to the impact that
the COVID-19 pandemic may have on sales and customer shopping
habits in the future; Nova’s retail cannabis business strategy,
including organic growth and strategic acquisitions; Nova’s
discount pricing model; the conversion of Nova Cannabis stores to
the Value Buds banner and the timing thereof; Nova’s 2021
objectives, including planned construction of new cannabis stores,
timing of new cannabis store openings, evaluation of potential
sites and sales growth, particularly in the Value Buds banner; the
ability of Nova to obtain government licenses for its new stores;
Nova’s gross margin as a percentage of sales and sales forecast for
the balance of 2021; and expectations as to cannabis consumer
demands.
With respect to forward-looking statements
contained in this news release, the Company has made assumptions
regarding, among other things, the COVID-19 pandemic and the impact
it may have on consumer behavior in Alberta and British Columbia;
Nova’s ability to identify locations for, construct and open new
cannabis stores and the cost related thereto; the availability of
hardware and equipment for those cannabis stores; government
regulation and applicable laws will not change in a manner adverse
to Nova; receipt of necessary regulatory approvals for Nova to open
new cannabis stores; Nova’s ability to obtain leases for new sites
and attract the necessary personnel to operate new cannabis stores;
the cost of converting existing cannabis stores to the Value Buds
banner; demand for the products Nova sells; other factors that will
drive sales growth in the Value Buds banner; availability of
acquisition opportunities for Nova; sustainability of competitors'
businesses and competition in the retail cannabis industry,
including from the illicit cannabis market; cannabis consumer
demands; and factors that influence cannabis consumer behavior.
Although the Company believes that the
expectations reflected in the forward-looking statements, and the
assumptions on which such forward-looking statements are made, are
reasonable, especially given the unprecedented uncertainty of the
full extent and impact of COVID-19, there can be no assurance that
such expectations and assumptions will prove to be correct. Readers
should not place undue reliance on forward-looking statements
included in this news release. Forward-looking statements are not
guarantees of future performance and involve a number of risks and
uncertainties that may cause actual performance and financial
results to differ materially from any estimates, forecasts or
projections. These risks and uncertainties include, among other
things, the duration and severity of the COVID-19 pandemic on the
business, operations and financial condition of the Company; the
risk that Alcanna (and Nova) will be unable to execute its
strategic plan and growth strategy, as planned without significant
adverse impacts from various factors beyond its control; dependence
on suppliers; potential delays or changes in plans with respect to
capital expenditures and the availability of capital on acceptable
terms; risks inherent in the liquor retail and cannabis industries;
competition for, among other things, customers, supply, capital and
skilled personnel; changes in labour costs and markets; incorrect
assessments of the value of acquisitions; general economic and
political conditions in Canada (including Alberta), and globally;
industry conditions, including changes in government regulations;
fluctuations in foreign exchange or interest rates; unanticipated
operating events; failure to obtain regulatory and third‐party
consents and approvals when required; changes in tax and other laws
that affect us and our shareholders; the potential failure of
counterparties to honour their contractual obligations; stock
market volatility; and the other factors described in the Company’s
public filings available at www.sedar.com. Readers are cautioned
that this list of risk factors should not be construed as
exhaustive.
The forward-looking statements contained in this
news release are made as of the date hereof. Except as expressly
required by applicable securities legislation, Alcanna does not
undertake any obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. The forward-looking statements
contained in this news release are expressly qualified by this
cautionary statement.
For Further Information
James BurnsVice Chair and Chief Executive
OfficerAlcanna Inc. (587) 460-1026
Alcanna (TSX:CLIQ)
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