RE:RE:$42M in inventoryThanks HouTx220 -
Although they had their supply agreements come to an end, they had qutie a bit of inventory of product that they could have moved into the CPG market, but they didn't. Theres obviously an issue with pushing product, at least during Q1 and Q2 to the retail chain which is their bigest challenge in my opinion. And with B2B coming to an end and being 100% CPG, they need to fix that quick in order to move product. This is something that Folwer and Nav had no experience in and are the reasons why this company stalled from a respectible growth in F2019 where they achieved $19M in revenue in Q4, down to $11.6M and $9.2M for Q1 and Q2 respectively. Now that I look back it was so obvious at how abrupt Nav's departure was merely days after Dec 31, the board had enough after they saw the dismal figured. That was probably the time to sell.
Colin very quickly took action and is that seasoned CEO with blood on his hands to know how to steer this ship correclty. Right-sizing the company and controlling costs, and now this news today of Humble-Fume being engaged to exlusively distribute Supreme's products and get them in all the stores across the country. Supreme isn't only the ones to blame for this poor quarter as their problems aren't any different than all other large LPs that have recently reported demonstrating a shrinking QoQ revenue results, not being able to move vast inventories, which can be blamed on poor rollout of cannabis retail across the coutnry, but mostly in Ontario where studies have calculated we need about 4,000 stores to service the market properly.
Now we're already halfway into Q3 so I don't have any high expectations of anything postive at that report as Colin just only recently started makign the changes above, and there hasn't been a single new store that opened in Ontario. They also haven't rolled out their 2.0 products yet.
I do not expect any good results from this company over the next two quarters, but I do expect improvement in strategy and Colin (or his successor) taking the necessary corrective actions for the best interest of shareholders.
The stock price in my opinion has had a poor earnings baked in, as alot of the selling pressure were from those "in the know". Price targets will be reduced and there will be further depression of the stock price. It will probably sit around this level for a while, and move with the sector. All eyes are now on Canopy tomorrow morning, but if they beat expectations, expect the sector to go green and go up with them, but Supreme may be punished and stay where it is, unless of course the markets beleives this is rock bottom and believes in Colin at the helm improving the company going forward.
The analyst from PI Financial set a price target of $1.50 based on a $12M quarter and them retrating their guidance. That price target may be reduced down to $1.25 which is still 3x today's price.
Of course there's always a chance that humble-fume can move that inventory over the next 6 weeks and we get a surprise in Q3 results. We won't know for 3 months. Until then, I'll make my money in US cannabis sector. Perhaps time to sell my tech stocks and take advantage of the price action here the next few days.
One other thing that may also be a wildcard is a potential partnership or sale. John clearly said he would never consider doing that back in the day, but Colin will do what is best for the shareholders. Clearly a partnership adds incredible value (look at CGC, CRON, etc).
HouTx220 wrote: Tran….All the years I’ve read this board I truly value your input and insight & would like your take/feedback on the following (emotions aside from today numbers).
The past news releases have been pretty clear about the company’s transition & focus away from Wholesale. This specifically stuck out to me in the NR..
“In Q2 2020, wholesale sales accounted for 38% of net revenue compared to 54% in Q1 2020. Supreme Cannabis’ remaining wholesale flower supply agreements came to an end, which contributed to lower quarter-over-quarter wholesale selling prices and sales volumes”
Letting those agreements come to an end was key in making the transition. It would also provide the necessary inventory for “humble-fume” to do what they're good at without worrying about filling orders. I know it’s horrible to assume, but what’s your thoughts on the Q3 numbers in May easily tripling/quadruple?
Although in sucks in the short term it does look like it’s a setup for the second half of the year. Also, I thought in a past release they mention holding back trims as well to support their oils and other products (correct me if I’m wrong).
Your feedback and insight would be appreciated!
Tks.