Curaleaf Streamlines Business Following Closure Of Operations In Mature Cannabis States
In this midweek Trade To Black Podcast, TDR Founder Shadd Dales and lead financial writer Benjamin A. Smith join ranks with millennial entrepreneur and OnlyGems Founder, Anthony Varrell. With news that Curaleaf Holdings (CNSX: CURA) (OTCMKTS: CURLF) was curtailing operations in mature states in the western Unites States, the panel analyzed what this means for the company, and ultimately, for the industry as newer markets mature going forward.
The discussion is in reference to last week news that Curaleaf was closing of the majority of its operations in California, Colorado and Oregon, beginning this month, as part of its continued effort to streamline its business. The company cited a “difficult operating environment in these investment states” as a primary reason for cutting back to “focus on cash generation in its core revenue-driving markets moving forward.”
We have a fiduciary responsibility to our shareholders to improve margins and fortify our balance sheet by controlling what we can in our business. We believe these states will represent opportunities in the future, but the current price compression caused by a lack of meaningful enforcement of the illicit market prevent us from generating an acceptable return on our investments.Curaleaf CEO, Matt Darin
Concurrent with these actions, Curaleaf has reduced its payroll by 10% which, when coupled with other cost savings initiatives, expects to realize $60 million in gross run-rate expense savings in 2023, exceeding its initial savings target by 50%. CEO has previously stated that focus on generating free cash flow is the company’s primary objective for 2023, as OpEx expenses are expected to decline significantly this year.
The move by Curaleaf to pull back in mature cannabis markets should come as no surprise to investors, as states like Colorado have seen aggregate sales decline in recent times.
Earlier this month, it was reported that Colorado saw an almost $100 million decline in cannabis tax revenue last year, owing to declining overall sales lead by small businesses. The Marijuana Industry Group (MIG) cited sales numbers released Wednesday by the Colorado Department of Revenue showing a sharp decline in recreational and medical marijuana sales since 2021.
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