Alcanna Reports 26.6% Sales Growth in Third Quarter 2019 and Strong Results From Nova Cannabis
EDMONTON, Alberta, Nov. 14, 2019 (GLOBE NEWSWIRE) — Alcanna Inc. (the “Company” or “Alcanna”) (TSX: CLIQ) today reported its results for the three and nine months ended September 30, 2019.
The Company achieved 26.6% growth in total sales compared to the third quarter of 2018 and same-store sales growth of 4.9% in its core Canadian liquor retail business. This marks the fourth straight quarter of strong market share gains by Alcanna. “We continue to execute our strategy according to plan in the third quarter. Regaining and growing market share in our core Alberta liquor business and beginning to carefully raise margins as we said we would,” said James Burns CEO. “Margin enhancements are continuing in the fourth quarter and we are on track for enhanced profitability in 2020 according to plan. Our Alberta liquor business continued to face headwinds in Q3 as a result of one of the coldest and wettest summers in decades, the soft Alberta economy, intense competition, and rising thefts and robberies in our stores. However, despite these factors, our results are coming in as planned and predicted and we believe that sticking to the plan we launched a year ago remains the best way to maximize earnings and to enhance shareholder value.”Alcanna’s Nova Cannabis brand generated $36.1 million in sales between October 17, 2018 and September 30, 2019 – for much of that period with only 6 stores open. Nova Cannabis sales for the three months ended September 30, 2019 were $12.9 million with gross margins of 28.6%.“Our Nova Cannabis stores are showing average sales per store which are higher compared to most of those publicly disclosed by other Canadian retailers. This confirms what we have been saying since before legalization. While many companies new to the retail industry opened stores anywhere they could obtain a lease in a race to be a “first mover” in Cannabis retail, Alcanna prudently leased Class A sites with the objective of building a sustainable long-term business in great locations where people actually shop,” said Mr. Burns.Third quarter and subsequent event highlights: With supply shortages no longer an issue, Alcanna now has 14 Nova Cannabis stores licensed in Alberta and is in the final stages of construction and inspection/licensing on a further 14. We expect to have 30 licensed and operating in Alberta by year-end (or shortly thereafter depending on regulatory delays due to the holiday season). Alcanna is poised to expand Nova Cannabis rapidly into Ontario if the Ontario government reverts to an open market as anticipated in early 2020. Our Queen Street West store in Toronto continues to show sales of approximately $400,000 – $500,000 per week.Same-store sales in Canadian liquor have increased by 4.9% and total company liquor sales have increased by 19.2%. Towards the end of Q3 2019 the focus shifted to enhancing margin and capitalizing on our increased market share. To date margin increases have been realised with no impact on market share and customer count.Alcanna made reductions to corporate overhead of approximately $2.0 million annually in the third quarter and intends to cut a further $2.0 million in annual spend in the fourth quarter. Management changes with respect to how the Company’s banners are operated will provide further opportunities for overhead reduction in Q1 2020.The third new Wine and Beyond store for 2019 has been built in Red Deer, Alberta and is scheduled to open on November 21, 2019. We are ready to expand Wine and Beyond in Ontario if the Ontario government’s reform of liquor retail permits the private retailing of alcohol on a basis similar to Alberta, which would allow an appropriate return on capital.FINANCIAL RESULTS1 Adjusted operating profit before amortization, adjusted net (loss) earnings and adjusted basic and diluted (loss) earnings per share are non-IFRS measures that do not have any standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. For more information on non-IFRS measures, see the ‘Non-IFRS Financial Measures’ in our Management’s Discussion and Analysis (“MD&A”) for the three and nine months ended September 30, 2019, which is available on the Company’s website (www.alcanna.ca/investors) and on the SEDAR website (www.sedar.com).On January 1, 2019, the Company adopted the new accounting standard, IFRS 16, Leases (“IFRS 16”) using the modified retrospective approach and has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The adoption of IFRS 16 has had a significant effect on the comparability of our reported results, including operating profit (loss) before amortization, which is disclosed in the unaudited Condensed Interim Consolidated Financial Statements for the three and nine months ended September 30, 2019 and 2018 and discussed further in the Company’s Management’s Discussion and Analysis for the three and nine months ended September 30, 2019.The adoption of IFRS 16 results in a significant increase in operating profit (loss) before amortization in 2019 which may not provide for a meaningful comparison to 2018 given that the comparatives for 2018 have not been restated. For the nine month period ended September 30, 2019, the adoption of IFRS 16 resulted in the recognition of depreciation expense related to right-of-use-assets of $13.4 million, lease liability interest charge of $14.1 million and a reduction to rent expense of $26.3 million. For the three-month period ended September 30, 2019, the adoption of IFRS 16 resulted in the recognition of depreciation expense related to right-of-use-assets of $4.9 million, lease liability interest charge of $5.1 million and a reduction to rent expense of $8.6 million.Sales in Q3 2019 were positively impacted compared to the same period in the prior year by:The acquisition of twelve (12) new stores in Q1 2019 operating as Ace Liquor and twenty-eight (28) new stores on June 25, 2019 operating as Solo Liquor.Operating five (5) retail cannabis stores that opened in Q4 2018, four (4) that opened in Q2 2019, and one (1) that opened in Q3 2019.Opening two (2) new Wine and Beyond stores in Q2 2019, one (1) convenience format store in Q2 2019, and two (2) new convenience format stores in Q3 2019.These increases were offset by the closure of seventeen (17) convenience-format stores since June 30, 2018, and a reduction in Canadian wholesale sales by $1.5 million as part of a deliberate attempt to lower the Company’s exposure to low margin, high credit risk bar and restaurant customers. In October 2019, the Company sold its wholesale customer list and has exited this service offering as it required high investment in capital assets and people, with low return.Net loss from continuing operations during the third quarter of 2019 compared to third quarter of 2018 decreased as a result of the increase in operating profit from the additional new liquor and cannabis stores, which was partially offset by the strategic decision to recalibrate pricing to regain market share.CONFERENCE CALLAlcanna Inc. will host an analyst and investor conference call on November 15, 2019 to discuss results for the three and nine months ended September 30, 2019. The conference call will take place at 10:00 a.m. MT (12:00 p.m. ET).To participate in the call, please dial (416) 340-2216 or toll-free (800) 273-9672. An archived recording of the conference call will be available approximately one hour after the completion of the call, by dialling: (905) 694-9451 or toll-free access: (800) 408-3053. The required passcode is: 5420415.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 258 locations in Alberta, British Columbia and Alaska. The Company also operates 11 cannabis retail stores under the “Nova Cannabis” brand, with 10 locations in the Province of Alberta and one in the Province of Ontario. With revenues in excess of $700 million per year, Alcanna processes over 20 million individual retail transactions of beverage alcohol and cannabis.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 STATEMENTSThis 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.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 significantly grow its cannabis retail store locations and enhance profitability of its liquor business.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, 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 risk that we will be unable to execute our strategic plan and growth strategy, including the capital allocation and retail cannabis strategy, as planned without significant adverse impacts from various factors beyond our 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), Alaska 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 InformationDavid Gordey
Executive Vice President and Chief Financial Officer