Canadian cannabis retailer Choom Holdings Inc. (CSE: CHOO) (OTCQB: CHOOF) is reporting flat sales this quarter, while it completes a restructuring plan and improves its balance sheet.
On Tuesday, the Vancouver-based firm released its first-quarter earnings for the period ended Sept. 30, with flat sales of $4.8 million, compared to $4.9 million last quarter.
Gross margin slid to 37 per cent from 38 per cent last quarter. Margins decreased slightly due to price reductions to clear out low-performing products, Choom said.
Read more: Annual sales up 200% for Choom, but nets $22M loss
The firm says it’s been incurring operating losses over the last seven quarters, “as it continues to grow its operations and execute its long-term business strategy to build one of Canada’s premier retail cannabis chains.”
Loss from continuing operations were cut by 55 per cent to $5.1 million from $11.5 million.
Selling, general and administrative expenses dropped 6 per cent to $2.2 million from $2.3 million last quarter.
Due to a gain on extinguishment of debt of around $7 million, Choom netted income of $5.1 million, compared to a loss of around $11.6 million last quarter.
On July 8, Choom completed restructuring of about $25.9 million of outstanding debt. It has reduced its $20-million debt to Aurora Cannabis Inc. (TSX: ACB) (Nasdaq: ACB) to $6.0 million, which will mature on Dec. 23, 2024. The maturity date of convertible debentures issued in December 2019 of $4.1 million was extended to Dec. 23, 2024.
In 2019, Choom opened the first legal cannabis store in Niagara Falls, making over $49,000 in sales on its opening day. Photo via Choom
Choom says the concurrent financing and restructuring has significantly improved its balance sheet, and reduced total liabilities by $14 million.
Inventory increased by 9 per cent this period to $991,000 from $910,000, which the firm attributed to investing in two new locations in Ontario.
As of Sept. 30, Choom had 16 stores across Canada, mostly in Alberta as well as two in both B.C. and Ontario.
Choom had $540,000 in cash at the end of the period.
The firm says it’s noticed a migration from dried flower to the pre-roll category over the last year, and its strategy is to “win in the more margin accretive 2.0 categories.”
“The market continues to be hyper competitive, both through price disruption and a significant increase in new competitor locations. Choom’s strategy remains focused on what we do best by providing an elevated customer experience through high quality service,” CEO Corey Gillon said in a statement.
“We believe there is continued demand and a gap in the market for a premium option that we deliver on with every customer interaction at Choom. We are pleased with the strides we have made across the entire business and most notably on the restructuring and balance sheet improvements in Q1.”
On Tuesday, company stock inched up to $0.05 on the Canadian Securities Exchange.
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