Alcanna Reports 25% Growth in Sales, 32% Growth in Gross Margin, and a Return to Profitability in the Second Quarter 2020


EDMONTON, Alberta, Aug. 19, 2020 (GLOBE NEWSWIRE) -- Alcanna Inc. (the “Company” or “Alcanna”) (TSX: CLIQ) today reported its unaudited financial results for the three and six months ended June 30, 2020. 

Second Quarter Financial Results and Business Update

Alcanna’s business in Q2 2020 continued with the strong performance reported for Q1 2020 with significant increases on all fronts from the prior year. Despite the COVID-19 pandemic forcing most retail stores to close, Alcanna’s liquor and cannabis retail stores were deemed to be essential services in all jurisdictions (other than a brief period of several days for the Ontario Nova Cannabis store) and therefore, all liquor and cannabis retail locations have remained open for business.

Highlights for the three months ended June 30, 2020:

  • Total sales from continuing operations were 24.9% higher rising to $215.6 million from $172.6 million in 2019.

  • Same-store liquor sales for Q2 2020 were up 13.4% while enhancing gross margins in the liquor operating segment to 22.7% in Q2 2020, compared to 21.7% in Q1 2020 and 22.1% in Q2 2019.

  • Total gross margin dollars rose 31.7% to $50.5 million from $38.3 million in the prior year. 

  • Operating profit before amortization and provisions for Q2 2020 rose 213.5% to $19.4 million from $6.2 million in the prior year.

  • Profit before income taxes rose to $6.1 million, compared to a loss of $6.2 million in the prior year.

Alcanna’s liquor stores in all regions experienced sales significantly higher than the prior year period in the second quarter of 2020. We believe that the stronger than expected same-store sales growth in the second quarter was primarily a result of shifting customer consumption habits due to more people dining and entertaining at home after the closure of on-premise liquor establishments (restaurants, bars, lounges, etc.) for the majority of this period of time, and now with the mass gathering and social distancing restrictions on these establishments when they reopened.  We believe these new consumer behaviour patterns will continue for the foreseeable future with on-premise locations being allowed only restricted operations and many consumers being uncomfortable in confined public places as long as the COVID-19 threat remains.

Cannabis retail sales have generally been in line with Management’s pre-COVID-19 expectations throughout the second quarter and continue to follow this trend throughout Q3 2020 to date. Unlike liquor, where on-premise consumption of liquor has been drastically reduced, the major competitor for legal cannabis retailers is the illegal market, which did not shut down due to the COVID-19 pandemic.

Total cannabis store sales for the second quarter of 2020 rose 63.9% to $14.4 million from $8.8 million in the prior year, and total gross margin dollars grew 132.1% to $4.9 million from $2.1 million. The Nova Cannabis business increased its positive operating profit before amortization and provisions contribution to Alcanna from the already positive Q1 2020 results, which we believe makes Alcanna the only Canadian public company in the retail cannabis business generating positive operating profit before income taxes.

The Company’s condensed interim consolidated financial statements and management’s discussion and analysis for the three and six months ended June 30, 2020 will be available in the Investors section of the Company’s website at www.alcanna.com and will be filed on SEDAR and available at www.sedar.com.

FINANCIAL RESULTS

(In thousands of Canadian dollars
except per share amounts, unaudited)
Three months ended
 June 30,
 Six months ended
 June 30,
 
2020
$
 2019
$

 2020
$

 2019
$

 
  (Restated)(i) (Restated)(i)
Sales
215,623 172,584 377,740 299,098 
Operating profit before amortization and provisions19,383 6,183 27,019 5,522 
Net earnings (loss) from continuing operations11,163 (6,043)4,641 (15,468)
Basic earnings (loss) per share from continuing operations0.28 (0.15)0.12 (0.39)
Diluted earnings (loss) per share from continuing operations0.26 (0.15)0.12 (0.39)
i) The financial results for the three and six months ended June 30, 2019 have been restated to exclude the results of the Company’s Alaska Operations, which have been classified as discontinued operations as a result of their sale on June 1, 2020.

CONFERENCE CALL

Alcanna Inc. will host an analyst and investor conference call on August 20, 2020 to discuss the unaudited financial results for the three and six months ended June 30, 2020. The conference call will take place at 10:00 a.m. M.T.

To participate in the call, please dial (416) 406-0743 or toll-free (800) 898-3989 and use the required participant access code: 4011583#. An archived recording of the conference call will be available approximately four hours after the event, by dialling: (905) 694-9451 or Toll-Free Access: (800) 408-3053. The required passcode is: 2084623#.

ABOUT ALCANNA INC.

Alcanna is one of the largest private sector retailers of alcohol in North America and the largest in Canada by number of stores – operating 226 locations in Alberta and British Columbia. The Company also operates 33 cannabis retail stores under the “Nova Cannabis” brand, with 32 locations in the Province of Alberta and one in the Province of Ontario.

Alcanna's common shares and convertible subordinated debentures trade on the Toronto Stock Exchange under the symbols "CLIQ" and "CLIQ.DB", respectively.

Additional information about Alcanna Inc. is available at www.sedar.com and the Company’s website at www.alcanna.com.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements are typically identified by words such as “continue”, “anticipate”, "will", "should", “plan”, “intention”, and similar words suggesting future events or future performance. All statements and information other than statements of historical fact contained in this news release are forward-looking statements. In particular, this news release contains forward-looking statements pertaining to implementing the Company’s strategy and objectives related to the growth of its liquor and cannabis brands, and the impact that the COVID-19 pandemic may have on sales and customer shopping habits in the future.

With respect to forward-looking statements contained in this news release, the Company has made assumptions regarding, among other things: the ability of management to execute the Company’s strategic plan and growth strategy, including its capital allocation strategy and specifically its ability to grow its cannabis retail store locations and enhance profitability of its liquor business, and assumptions about the COVID-19 pandemic and the impact it might have on the economies in the jurisdictions that the Company operates in.

Although the Company believes that the expectations reflected in the forward-looking statements, and the assumptions on which such forward-looking statements are made, are reasonable, especially given the unprecedented uncertainty of the full extent and impact of COVID-19, there can be no assurance that such expectations and assumptions will prove to be correct. Readers should not place undue reliance on forward-looking statements included in this news release. Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that may cause actual performance and financial results to differ materially from any estimates, forecasts or projections. These risks and uncertainties include, among other things, the duration and severity of the COVID-19 pandemic on the business, operations and financial condition of the Company; the risk that Alcanna will be unable to execute its strategic plan and growth strategy, including the capital allocation and retail cannabis strategy, as planned without significant adverse impacts from various factors beyond its control; dependence on suppliers; potential delays or changes in plans with respect to capital expenditures and the availability of capital on acceptable terms; risks inherent in the liquor retail and cannabis industries; competition for, among other things, customers, supply, capital and skilled personnel; changes in labour costs and markets; incorrect assessments of the value of acquisitions; general economic and political conditions in Canada (including Alberta), and globally; industry conditions, including changes in government regulations; fluctuations in foreign exchange or interest rates; unanticipated operating events; failure to obtain regulatory and third‐party consents and approvals when required; changes in tax and other laws that affect us and our security holders; the potential failure of counterparties to honour their contractual obligations; stock market volatility; and the other factors described in the Company’s public filings (including the Annual Information Form) available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking statements contained in this news release are made as of the date hereof. Except as expressly required by applicable securities legislation, Alcanna does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

For Further Information

David Gordey
Executive Vice President and Chief Financial Officer
Alcanna Inc.
(780) 497-3262