A steady upward trend in same-store sales led by its member’s pricing program has lent Fire & Flower Holdings Corp. (TSX: FAF) (OTCQX: FFLWF) better profits for three quarters in a row, according to latest financial filings.
The Canadian cannabis company posted its financial and operational results for the fourth quarter and the fiscal year 2022, which ended on Dec. 31.
Fire & Flower made $156 million in revenue during the 48-week fiscal year 2022 and $30.5 million in the shorter 9-week fourth quarter. The decrease in the last quarter’s revenue was due to it having fewer weeks than the previous quarter.
Still, the company faced financial losses of $15 million for the year and $3.8 million for the fourth quarter, after adjusting for specific expenses like restructuring and integration costs. The total net loss for the year was $89.5 million, and for the fourth quarter, it was $29.9 million. At the end of the period, the company had $12.4 million in cash.
Fire & Flower’s CEO, Stéphane Trudel, said that 2022 was a turning point for the company, with sales and profits growing for three straight quarters. The CEO expect 2023 to be a “transformative year,” aiming for positive financial results in the first half by focusing on the company’s retail business, boosting revenue and profits, while cutting costs.
The company’s profit for the year was $41.1 million (26.4% of revenue) and $7.4 million (24.3% of revenue) for the fourth quarter.
“We are delivering higher gross margin percentages with increased retail foot traffic, consumer price credibility and using our advanced Hifyre data capabilities to ensure that we have the most in-demand products for our customers,” Trudel said in a statement.
Same Store Sales Boost
The company experienced positive results, with a 3.9% year-over-year same-store sales increase in the fourth quarter, showing continued improvement over previous quarters and maintaining the trend into early 2023. The company noted that the improvements could be attributed to the company’s Spark Perks member pricing program and an enhanced merchandise strategy, which has built engagement with returning customers.
The retail gross margin was 25.4%, marking a consecutive quarterly improvement from the previous quarter.
Additionally, the company saw a negative adjusted EBITDA of $3.8 million for the fourth quarter which includes restructuring, integration costs, and other one-time charges.
Some issues, like the underperformance of its Pineapple Express delivery business, led to a decrease in the overall gross margin (24.3%). The company has taken steps to address these issues, hoping to save $6 million in expenses and achieve a positive financial outcome in the first half of 2023.
Fire & Flower anticipates saving $6 million in sales, general, administrative (SG&A), and lease expenses for 2023. The company expects to achieve positive adjusted EBITDA during the first half of the fiscal year.
Digital revenue totaled $1.7 million, which the company said was primarily due to the shortened quarter and timing of data revenue.
Circle K Connection
During the year, the company fortified its partnership with Circle K, a convenience store chain, to a total of seven stores, including both corporate and licensed stores.
The expansion aims to up the company’s presence and reach more consumers at roadway pit stops, and is a mutually-benefiting model that the gas station owner has been trying to push for in Florida alongside GTI’s Rise dispensaries, to the state department’s chagrin.
Fire & Flower is also actively evaluating retail consolidation opportunities that would be accretive to the cash flow of the business, it said, meaning that it is looking for opportunities to merge or acquire other retail businesses that could improve its financial picture with more cash in its pockets.
“We continue to look towards consolidation in the industry and are actively pursuing opportunities that are fully accretive to our business with the long-term goal of achieving 10% market share through a high quality and profitable retail network. In addition, our strategic relationship with Alimentation Couche-Tard continues through our co-located store program that already has provided key learnings to inform future developments in Canada, the U.S. and Europe.”