Alcanna Reports First Quarter 7.9% Growth in Same Store Liquor Sales and 7.5% Gain in Gross Margin Dollars From the Liquor Division

News and research before you hear about it on CNBC and others. Claim your 1-week free trial to StreetInsider Premium here.

EDMONTON, Alberta, May 17, 2021 (GLOBE NEWSWIRE) — Alcanna Inc. (the “Company” or “Alcanna”) (TSX: CLIQ) today reported its financial results for the three months ended March 31, 2021.  

First Quarter Financial Results and Business Update

In Q1 2021, Alcanna’s liquor division continued the strong performance achieved in 2020. Same-store liquor sales from continuing operations rose by 7.9% and gross margin dollars from the liquor division from continuing operations increased 7.5% to $27.7 million from $25.8 million.

• The Company believes these increases are primarily a result of: (i) the change in pricing strategy that was implemented in 2019 and 2020, and has continued into 2021, which was designed to regain lost market share and grow the customer base; and (ii) shifting customer consumption habits due to more people dining and entertaining at home and continuing to stay away from on-premise liquor establishments (restaurants, bars, lounges, sports venues, etc.). The Company believes these new behaviour patterns have become entrenched in people’s lifestyle choices and will continue to some extent even after the COVID-19 pandemic subsides.
• The favourable result to last year is accentuated considering the significant increase in customer demand that was observed in the last three weeks of March 2020 as customers began stockpiling product at the start of the COVID-19 pandemic.
• Despite the fact that the Company has exited thirty-one (31) stores in Alberta during the past fifteen (15) months as a strategy to sell or close lower-revenue/under-performing convenience-format liquor stores in Alberta, total liquor sales from continuing operations in the first quarter still rose to $123.8 million from $122.6 million in 2020.  

Since the March 22, 2021 transaction which spun out Alcanna’s cannabis business into a separate publicly traded company – Nova Cannabis Inc. (“Nova”) (TSXV: NOVC) – the Company’s participation in cannabis retail is now indirect through its approximately 63% ownership of Nova.

• Nova’s strategy is to continue to be one of Canada’s largest and fastest growing cannabis retailers by delivering compelling value to cannabis consumers – and encouraging greater migration from the illicit market. Nova’s main banner, Value Buds, offers discount prices on a wide range of cannabis products from value to premium.
• Nova currently has fifty-three (53) cannabis retail locations in Alberta, Saskatchewan and Ontario, with a further thirty (30) locations under development/construction (Ontario: nineteen (19); Alberta: eleven (11)), the majority of which are expected to be ready to open in the second half of 2021, subject to receiving government licences.
• To date in 2021, eighteen (18) locations have been converted from Nova Cannabis to Value Buds. In recent weeks, these Value Buds locations have seen, on average, transaction count and sales increases of in excess of 120% compared to the period before conversion. These increases were realized at a gross margin as a percentage of sales of approximately 19% compared to approximately 32% in the period before conversion. As Nova continues to increase the number of Value Buds locations and introduce this banner to more customers, it anticipates that gross margin as a percentage of sales will blend out to be approximately 12% to 15% in the second half of 2021 and Nova anticipates that the sales increases already realized to date will continue and possibly accelerate.
• For accounting purposes, the transaction completed between Alcanna and YSS Corp. constituted a reverse takeover of YSS Corp. by Alcanna, and therefore Alcanna has continued to consolidate the financial results of Nova, including the financial results from the former YSS Corp. operations from March 22, 2021 to March 31, 2021.
• Total cannabis store sales for Q1 2021 rose 17.2% to $18.4 million from $15.7 million in the prior year. Total gross margin dollars decreased 8.0% to $4.8 million from $5.2 million and gross margin as a percent of sales was 26.0% for the period (Q1 2020 – 33.1%). The decrease in gross margin is primarily attributable to the strategic lowering of gross margin stores in support of Nova’s growth strategy discussed earlier.

The Company’s total operating profit before depreciation, remeasurements and provisions for Q1 2021 decreased 17.7% to $3.2 million from $3.9 million in the prior year, and the net loss from continuing operations for Q1 2021 rose to $9.5 million, compared to $8.4 million in the prior year. Both declines were primarily attributable to the expenses related to the transaction to spin off the Company’s cannabis business in Q1 2021.

The Company’s condensed interim consolidated financial statements and management’s discussion and analysis (“MD&A”) for the three months ended March 31, 2021 will be available in the “Investor Centre – Financial Reports” section of the Company’s website at www.alcanna.com and will be filed on SEDAR and available at www.sedar.com.

FINANCIAL RESULTS

i) The financial results for the three months ended March 31, 2020 have been restated to exclude the results of the Company’s discontinued operations comprised of the British Columbia operations, which have been disposed as part of the Company’s coordinated plan to exit the British Columbia convenience-format retail liquor store business.

CONFERENCE CALL

Management of Alcanna and Nova, Alcanna’s majority owned subsidiary, will conduct a joint conference call on May 18, 2021 at 12:00p.m. ET (10:00a.m. MT) to discuss their respective financial results.

To participate, please dial (416) 406-0743 or (800) 806-5484 and use the required participant access code: 3518326#. The playback will be made available approximately four hours after the event at (905) 694-9451 or (800) 408-3053, required access code: 1361632#.

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 in excess of 170 locations in Alberta and British Columbia. Nova operates 53 cannabis retail stores in Alberta, Ontario, and Saskatchewan.

Alcanna’s common shares trade on the Toronto Stock Exchange under the symbol “CLIQ” and Nova’s common shares trade on the TSX Venture Exchange under the symbol “NOVC”.

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 the impact that the COVID-19 pandemic may have on sales and customer shopping habits in the future; Nova’s retail cannabis business strategy, including organic growth and strategic acquisitions; Nova’s discount pricing model; the conversion of Nova Cannabis stores to the Value Buds banner and the timing thereof; Nova’s 2021 objectives, including planned construction of new cannabis stores, timing of new cannabis store openings, evaluation of potential sites and sales growth, particularly in the Value Buds banner; the ability of Nova to obtain government licenses for its new stores; Nova’s gross margin as a percentage of sales and sales forecast for the balance of 2021; and expectations as to cannabis consumer demands.

With respect to forward-looking statements contained in this news release, the Company has made assumptions regarding, among other things, the COVID-19 pandemic and the impact it may have on consumer behavior in Alberta and British Columbia; Nova’s ability to identify locations for, construct and open new cannabis stores and the cost related thereto; the availability of hardware and equipment for those cannabis stores; government regulation and applicable laws will not change in a manner adverse to Nova; receipt of necessary regulatory approvals for Nova to open new cannabis stores; Nova’s ability to obtain leases for new sites and attract the necessary personnel to operate new cannabis stores; the cost of converting existing cannabis stores to the Value Buds banner; demand for the products Nova sells; other factors that will drive sales growth in the Value Buds banner; availability of acquisition opportunities for Nova; sustainability of competitors’ businesses and competition in the retail cannabis industry, including from the illicit cannabis market; cannabis consumer demands; and factors that influence cannabis consumer behavior.

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 (and Nova) will be unable to execute its strategic plan and growth 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 shareholders; the potential failure of counterparties to honour their contractual obligations; stock market volatility; and the other factors described in the Company’s public filings 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

James BurnsVice Chair and Chief Executive OfficerAlcanna Inc. (587) 460-1026

Source: Alcanna Inc.