26.6% sales growth in 3rd qtr. 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.