Shares of Canopy Growth (NYSE:CGC) were crashing 18.5% lower as of 10:01 a.m. EDT on Friday. The steep drop came after the Canadian cannabis producer announced…
its fiscal 2020 fourth-quarter and full-year results before the market opened.
Canopy’s net revenue in Q4 fell 13% from the previous quarter to 107.9 million Canadian dollars. The company posted a huge net loss of CA$1.3 billion, or CA$3.72 per share. Analysts were expecting Q4 revenue of CA$128.9 million and a net loss per share of CA$0.59.
Any company that misses Wall Street’s expectations as badly as Canopy did is going to experience repercussions. It’s important to understand why Canopy underperformed so much, though.
A major factor behind Canopy’s sales decline was the COVID-19 pandemic. The company had to close its retail stores in March, causing its recreational business-to-consumer sales to slip 14% from the previous quarter. Canopy’s business-to-business sales fell by 31% quarter over quarter. Although sales grew for softgels, oils, and cannabis derivative products, it wasn’t enough to offset a decline in sales of cannabis flower and pre-roll joints.
This revenue drop-off trickled down to Canopy’s bottom line. Increased operating expenses also were partly to blame for the company’s eye-opening net loss. However, the biggest issue was Canopy’s CA$743 million impairment and restructuring charges in Q4.
The good news for Canopy is that the negative impact of the COVID-19 pandemic will only be temporary. The reopening of the Canadian economy should boost the company’s sales. Also, its impairment and restructuring costs are one-time items that won’t be issues for Canopy going forward.
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