The Alberta cannabis market has been the hottest in Canada so far and private retailers have been cashing in on the province’s free market approach to issuing store licences. One such company is High Tide Inc. (CSE:HITI), as the pot retailer announced last week it opened the doors to two new stores in Calgary and Vegreville — bringing its total up to 19 shops across the province.
The Alberta-based company’s stores operate under its Canna Cabana brand, and both new locations hosted grand openings last weekend and have been hawking cannabis products since then.
Although the heart of High Tide’s operations are in Wild Rose province, the company now has a total of 23 stores up and running across the country — three in Ontario and one in Saskatchewan.
But the company isn’t resting on its laurels and said it has plans to open another two locations under its KushBar banner in the Great White North — boosting its total to 25 stores by mid-September. Last summer, High Tide acquired controlling interest of KushBar Inc. and at that time planned to use the brand for several retail applications.
#Vegreville and #Calgary(Crowfoot Ave) are shaking things up this Saturday!
Two More Grand Openings! Join us for live music, giveaways, and of course the flower 🌺 https://t.co/M2qpAZoxcF pic.twitter.com/GfKJoR6qXt
— Canna Cabana (@CannaCabana_) September 5, 2019
High Tide high on growth
The Canadian government pledged its main goal by legalizing adult use cannabis was to eliminate the black market. Alberta has led all provinces by issuing more than 250 licences to help meet that goal and boost legal sales.
Although the market appears to be getting crowded, in Colorado where legal sales have soared there is one store for every 10,000 people, And so far in Alberta, the saturation rate is one shop for every 17,000 people.
Meanwhile, High Tide’s expansion plans aren’t finished yet. The Alberta government allows pot retailers a maximum of 15 per cent market share in the province, and the company said it other stores are in various stages of development and construction to fulfill that maximum.
That means there’s ample room for High Tide to grow, and it has faith in its customers for support.
– Raj Grover, President and CEO of High Tide
It’s hard to gauge consumer loyalty in the nascent cannabis industry, but some of the company’s stores score four stars on Google with hundreds of customer ratings. Of course, High Tide will need that support to translate into dollars in order to keep up with the growing competition in Alberta.
Cash could be a problem
The company also said in its press release it had secured a one-year loan for $2 million at an interest rate of 12 per cent. This is in addition to convertible debt that it issued earlier this year to help fund its growth. Cash flow has been an issue for the company and although it has been seeing improvements, its expansion strategy has led to it bleeding lots of cash.
High Tide is coming off a strong quarter where it saw its sales reach $6.6 million. But with climbing losses and cash reserves depleting, it makes for a difficult situation to grow — a common problem in the industry.
Year to date, the company’s stock has fallen 5 per cent and if it doesn’t build on its modest $77 million market capitalization, it’s going to be a challenge for it to raise capital through the equity markets.
At a price of $0.36, High Tide may be weary of diluting its stock further. However, taking on debt is not a desirable option either.