Yahoo Finance Tilray CFO calls for 'nice one-time COVID pickup' for pot sales amid reopening
Tilray (TLRY.TO)(TLRY) chief financial officer Carl Merton says he expects a "nice one-time COVID pickup" for his company and the legal cannabis sector at large as Canada's most populous province emerges from pandemic lockdowns.
Merton, an executive with Aphria prior to its recent combination with Tilray, pointed to COVID-19 restrictions in Ontario. He says lockdown measures have prevented more than 100 newly-opened pot shops from allowing their first customer through their doors as stores rely on click-and-collect and delivery. That lack of face-to-face contact with budtenders, he says, has reduced impulse purchases and steered consumers towards less profitable, value-priced products.
COVID-19's impact has been felt across the sector, ranging from shutdowns at cultivation facilities to delayed new product listings. In April, Aphria said provincial measures to control the spread of the virus were more impactful than the company expected, resulting in smaller orders from provincial wholesalers and $5 million in product returns.
"We have been in hard lockdowns since November in Ontario, the most populous province in Canada, and the province that has the highest amount of revenue going through the cannabis space," he told a virtual audience at the Stifel Cross Sector Insight Conference on Tuesday. "That's a real headwind-type experience for our business."
Ontario will enter the first stage of its reopening plan on Friday, allowing cannabis retail stores to open for in-person sales for the first time in months. Merton expects the change will have a positive impact that will flow through retailers to licensed producers (LPs) within weeks.
"As people start returning to stores, you're going to see demand start to increase. The retailer will be a little bit slow in their initial orders. They don't want to get stuck with a lot of inventory coming out of COVID," he said.
"That will then filter out to the [provincial] control boards, and they'll run through a bit of their inventory before they order. Then you will start to see a tailwind for the LPs. I see that happening in the month to six-week period after that initial reopening."
According to Statistics Canada, Canadians spent $298.1 million on legal recreational cannabis in March, a 13.8 per cent increase from $263 million spent in February.
Merton describes the sales growth trend as "stunted during the COVID period." He says he expects Ontario's reopening to positively impact Tilray's fiscal first-quarter 2022 financial results.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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