Canopy Growth Plunges as Steep Demand Drop Sparks Wide Loss

Canopy Growth plunges after a steep drop in demand for pot and pot-infused products sparks a wider-than-expected quarterly loss.

Shares of Canadian cannabis-product producer Canopy Growth  (CGC) - Get Canopy Growth Corporation Report plunged on Friday after the company posted a significantly wider-than-expected fiscal fourth-quarter loss, driven by a steep decline in demand for pot and pot-infused products that sparked it to take a C$743 million charge.

The Smiths Falls, Ontario-based company reported a fiscal fourth-quarter net loss of C$1.3 billion (US$946.2 million), or C$3.72 a share, vs. a loss of C$379.1 million, or C$1.10 a share, in the comparable year-earlier period. Analysts polled by FactSet had been expecting a loss of 44 cents a share.

Sales rose to C$115.1 million from C$106.5 million a year ago, above analysts’ forecasts.

The maker of cannabis-infused products including drinks, chocolate and vape devices, which had already been struggling with lower-than-expected consumer demand, took a particularly strong hit through the January-March period as the Covid-19 pandemic turned consumers off of non-essential goods.

Lack of demand for pot itself also cast a fog over the company’s fourth-quarter results, with recreational pot-product sales to retailers including softgels, oils and “Cannabis 2.0 products” dropping 31% from the third quarter.

Sales directly to consumers dropped 14% “due to the expected off peak seasonal demand decline and the closure of corporate-owned retail stores late in the quarter in response to Covid-19,” the company said.

Offsetting the declines was an increase in international cannabis sales, specifically from Germany, which increased 14% from the third quarter. International cannabis revenue accounted for 24% of total cannabis revenues in Q4 2020.

Overall, the company took a "mostly non-cash" charge of C$743 million during the quarter. It also announced it was withdrawing guidance for fiscal 2021. 

Separately, Canopy Growth disclosed that an indirect wholly owned subsidiary of Constellation Brands  (STZ) - Get Constellation Brands, Inc. Class A Report exercised warrants for approximately C$245 million, representing approximately 5.1% of the company’s outstanding common stock.

Canopy Growth stock was down nearly 16.5% at $18.14 a share in trading on Friday.