By Steve Gelsi
Trulieve Cannabis Corp. on Wednesday swung to a loss and cut its revenue outlook for the year as inflation impacted its prospects and softness in wholesale markets weighed on results.
The Tallahassee, Fla.-based cannabis company lowered its 2022 revenue estimate by 5% from the low end of prior guidance to a range of $1.25 billion to $1.30 billion.
“Factoring in strategic changes across our business, the impact of inflation on consumer spending, softness in wholesale markets, and the lack of visibility in the current macroeconomic environment, we are adjusting 2022 revenue guidance,” the company said.
Trulieve /zigman2/quotes/207658767/composite TCNNF +2.12% /zigman2/quotes/210560499/delayed CA:TRUL +0.77% said it lost $22.5 million or 12 cents a share in the second quarter, after posting net income of $40.9 million, or 31 cents a share, in the year-ago quarter.
The company’s adjusted loss for the quarter was a penny a share, compared to adjusted income of 35 cents a share in the year-ago quarter.
With a boost from organic retail sales and the benefit of its Harvest acquisition in Oct., 2021, revenue rose 49% to $320.3 million from $215.1 million.
The company matched the Wall Street estimate for a loss of a penny share, and fell slightly short of the $322.0 million revenue view, according to FactSet data.
Shares of Trulieve fell 1.3% on Wednesday afternoon.
Jefferies analyst Pablo Zuanic reiterated an outperform rating on Trulieve and trimmed his price target by $3 to $54 a share.
Management is “enthusiastic” about well-funded and more focused attempts to put adult use legalization on the ballot, Zuanic said.
Trulieve management “also thinks the current landscape (macro challenges, lack of capital market access) will create attractive M&A opportunities,” Zuanic said .
Second-quarter retail revenue rose 3% to $298.6 million and wholesale, licensing and other revenue fell by 22% sequentially to $21.7 million.
“Trulieve has the capital, discipline, and experience to navigate short term headwinds and emerge as a stronger company,” CEO Kim Rivers said in a prepared statement.
In reaction to a spike in inflation, Trulieve has noticed a shift in buying patterns in some markets from premium to value-priced cannabis such as the company’s Roll One cannabis brand, Rivers told MarketWatch on July 27 at the Trailblazers event in New York City.
“The good news for us is we have supply chain control so we can adjust our product mix, which is critical in a downturn,” Rivers said.
Trulieve ended the quarter with activity in 11 U.S. states, but it’s currently weighing options to exit the Nevada market.
However, it’s expanding in Arizona, where it has opened one new dispensary so far during the current quarter. Since June 30, it’s also opened six other dispensaries around the U.S.
At last check, its overall footprint includes 75 retail dispensaries and more than 4 million square feet of cultivation and processing capacity.
Trulieve said it made an initial contribution to the Smart and Safe Florida campaign to introduce a statewide ballot in November, 2024, to allow adult use cannabis sales in the Sunshine State.
Prior to Wednesday’s trades, Trulieve shares were down 49% so far in 2022, while the AdvisorShares Pure US Cannabis ETF /zigman2/quotes/220307682/composite MSOS +4.26% has fallen 54% and the S&P 500 /zigman2/quotes/210599714/realtime SPX +2.59% has dropped by 13.5%.