Curaleaf earnings show legal U.S. weed sales flattening out as prices decline

U.S. cannabis producer Curaleaf Holdings Inc. on Monday reported a bigger loss than expected during its third quarter, amid what it said were “unexpected revenue impacts” in Florida and New Jersey.

Curaleaf
CURLF,
-3.43%

reported a net loss of $54.7 million, or 7 cents a share, compared with a loss of $56.9 million in the same quarter last year, or 8 cents a share. Sales came in at $340 million, compared with $317 million in the prior-year quarter; sales grew just 1% from the previous quarter.

Analysts polled by FactSet expected a loss of 3 cents a share on revenue of $337 million. Shares closed 3.4% lower on Monday.

Curaleaf — one of the largest U.S. cannabis producers, with dozens of dispensaries and some degree of operations in 22 states — has opened new stores in states like Arizona, Florida and Pennsylvania in recent weeks. But the legal U.S. cannabis industry has faced a drop in weed prices, as legal producers grow aggressively and as the illicit market maintains its hold on cheaper product, while consumers appear to be rethinking their shopping habits in a universe of rising prices for basics like groceries and gasoline.

Ben Kovler, CEO of Curaleaf rival Green Thumb Industries Inc.
GTBIF,
-3.84%
,
citing data from BDSA, recently told MarketWatch that U.S. cannabis sales were up 3%, while unit sales had jumped 22%. The gap between revenue and the amount of goods sold — which indicate lower prices — has made it more difficult for multistate operators to manage their own costs.

For more: Amid steep inflation, one thing is getting cheaper — cannabis

Ahead of Curaleaf’s earnings, other analysts also said that rising prices elsewhere posed a danger to the legal-weed market.

“Per our review of state-level sales data in the U.S., it appears that in Q3/22, end-user sales at the retail level increased, on average, by ~1.2%. However, many of the markets with a higher concentration of MSO participation were flat to slightly down in a number of cases,” Canaccord analyst Matt Bottomley said in a note last month.

“As was a key theme in Q2, we believe inflationary pressures on consumer spending will continue to weigh on growth as the cost of food, transportation and other nondiscretionary staples rise and demand a higher proportion of wallet share from consumers,” he continued.

Curaleaf reported as voters in five states prepare to vote on Tuesday on marijuana-reform measures. Voters in Maryland and Arkansas will decide whether to legalize recreational use. In Missouri, they’ll vote on a measure that would lift state restrictions on personal use. North Dakota and South Dakota will also vote on legalization measures.

Nineteen states allow recreational cannabis sales. A majority of states have now legalized marijuana for medicinal or recreational use.

Curaleaf stock has slid 38% through this year. By comparison, the S&P 500 index
SPX,
+0.96%

has declined 20.9%.

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