Canopy Growth reports bigger than expected quarterly loss

Packaging for recreational cannabis products are shown at Canopy Growth Corporation's Tweed headquarters in Smiths Falls, Ont., on Friday, Oct. 12, 2018. THE CANADIAN PRESS/Justin Tang

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 and the company abandoned a profitability target.

Its U.S.-listed and Canadian shares ended down about 21 per cent as the company withdrew its forecast of becoming EBITDA positive by the end of fiscal 2022 due to the coronavirus crisis.

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However, Chief Executive Officer David Klein told Reuters late on Friday the company will update its financial outlook in the second half of its fiscal year once more work is done on resetting its product lineup, footprint and general strategy.

Canopy is in the middle of a restructuring program that has included divestitures and layoffs aimed at turning profitable, and Klein said the company has absorbed most of the charges.

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The reported fourth-quarter included C$743 million ($539 million) in charges, pushing net loss attributable to Canopy to C$1.30 billion.

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Excluding the charges, Canopy reported C$1.55 per share loss, much bigger than analysts’ average estimate of C$0.59, according to Refinitiv data.

The COVID-19 pandemic was expected to give cannabis companies a boost as customers stockpiled ahead of lockdowns.

But delays in the launch of ‘2.0 products’ such as pot brownies, beverages and vapes hit Canopy’s recreational revenue and pulled down overall revenue by 13 per cent compared with the third quarter.

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Canopy’s recreational market share percentage declined from the low-20s to high teens, Chief Financial Officer Mike Lee told analysts.

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“Simply put, we missed opportunities,” he said.

Jefferies analysts 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.

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