Cronos Rises on First-Quarter Earnings Beat

Cronos says its distribution channels are experiencing disruptions due to the coronavirus pandemic.
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Cronos Group  (CRON) - Get Report shares were rising in premarket trading Friday as the Canadian cannabis company beat Wall Street's first-quarter earnings expectations.

The company said, however, that its distribution channels continue to experience disruptions globally due to the coronavirus pandemic.

Shares of the Toronto-based company were up 3.8% to $5.80 in premarket trading.

Cronos Group reported net income of $75.7 million, or 20 cents a share, down from $313.9 million, or 33 cents a share, a year ago, but trounced the FactSet consensus forecast for a loss of 6 cents a share.

Net revenue totaled $8.43 million, compared with $3.004 million a year ago; analysts expected $10.5 million. 

The revenue increase was largely driven by continued growth in the adult-use Canadian cannabis market, sales resulting from the launch of cannabis vaporizers to the Canadian market, including both adult-use and direct-to-consumer, and the inclusion of the Redwood acquisition in the financial results.

Cronos Group saw an $8 million write-down in inventory of dried cannabis and extracts and said it anticipates further inventory write-downs due to pricing pressures in the marketplace and the impact of its operational repurposing its Peace Naturals Campus.

Cronos Group's distribution channels continue to experience disruptions globally from the pandemic. 

Many brick-and-mortar retailers in the U.S., where Lord Jones products are distributed, have closed, although some retail partners continue to operate through their online sites. Lord Jones continues to sell directly to consumers through its website. 

In Canada, the company said, brick-and-mortar cannabis retailers in certain provinces have mandated curbside click-and-collect models, reduced store opening hours, or have closed retail entirely.

"The slowdown and disruption faced by retail partners, in addition to quarantine measures and travel restrictions, impacts our customers' ability to access our products in the U.S., Canada and other jurisdictions in which the company operates," Cronos Group said. "COVID-19 restrictions differ across jurisdictions, which has resulted in increased uncertainty in forecasting customer demand and sales velocity."

Cronos Group said it believes it has sufficient inventory to meet current demand.