Exclusive news and research on the wine, spirits and beer business

Cresco Sees “Price Compression” Weigh Down Third-Quarter Sales

November 22, 2022

Illinois-based multistate operator Cresco saw sales slip 4% sequentially and 2% year-on-year in the three months through September to $210 million. Adjusted EBITDA fell more substantially, with its $42 million tally registering 17% below the previous quarter and 26% below the same period a year ago. Still, the company’s net loss was more than cut in half on a sequential basis, at $3.2 million.

Cresco said third-quarter growth in emerging markets was “offset by price compression, increased verticality by retailers, and the company’s strategic exit of third-party distribution in California.” Excluding the impact of that California distribution exit, sales were up 2% year-on-year. On the plus side, retail revenue increased 11% year-over-year to $118 million, marking an average increase of $2.35 million per store open for the entire quarter.

“We took actions to reduce costs to position ourselves for long-term improvement,” said co-founder and CEO Charlie Bachtell. “This included the closing of underperforming facilities and the sell through of related inventory. While this had a short-term negative impact on gross margin in Q3, it was the right thing to do to align our cost structure and optimize our operations ahead of closing the Columbia Care transaction and in furtherance of our commitment to improved margin growth in the coming quarters.”

Meanwhile, Columbia Care, which is set to be acquired by Cresco, posted third-quarter sales up 2.4% sequentially to $133 million and adjusted EBITDA up 75% sequentially to $21 million. Its top markets by revenue were California, Colorado, New Jersey, Ohio, and Virginia. Looking ahead, Columbia Care dispensaries in development include seven in Virginia, one in West Virginia, and one in New Jersey. Additionally, the company has expanded its Triple Seven brand into the Pennsylvania market and launched a new edibles label, Hedy, across Arizona, Colorado, Delaware, Massachusetts, Missouri, and Virginia.

“Although we continue to anticipate a more challenging operating environment over the next 12-18 months, we are encouraged by the ongoing resilience we’ve seen throughout our markets,” said Columbia Care CEO Nicholas Vita.

Cresco’s previously announced $2 billion acquisition of Columbia Care took a step forward earlier this month when the companies agreed to divest cannabis retail and production assets in New York, Illinois, and Massachusetts to Sean “Diddy” Combs for $185 million. They’re now working toward final agreements on more assets required to be divested in Florida, Ohio, and Maryland, and are targeting closure of the deal around the end of the first quarter of next year.—Daniel Marsteller

Subscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning. You will also receive the Cannabis edition as part of your subscription.

Tagged : , ,

GET YOUR FIRST LOOK AT 2021 DATA AND 2022 PROJECTIONS FOR THE WINE AND SPIRITS INDUSTRIES. ORDER YOUR 2022 IMPACT DATABANK REPORTS. CLICK HERE.

Previous :  Next :