Lifeist Wellness Inc V.LFST

RE:Random...Gross profit Margins....my mistake

[randomtask]

First off, no need to apologize; second, great post.

I'll only add a few takeaways - while in theory expenses should not increase in this model, they have in fact been going up all throughout Fiscal 2020 (we'll see what Q4 has in store but i imagine they will be on the rise slightly again).

I did see the 7% gross margin in the US presentation but it was 10% or 11% in Q3 financials, not sure if they are doing a currency conversion on that or if the 7% data is just newer than the Q3 data.

Ceteris paribus they should start to outperform other retailers but again that's in theory, the execution of Namaste has been terrible and i still think the the PeakBirch NR was fluff and that accessories south of the border don't add anything material to the bottom line.  

The 0.5% or less is simply dividing CannMart revs by national revs over the same period. I didn't differentiate between medical and recreational.  When we look at bricks and mortar vs online, they are still severely outperforming.  HITI and FAF revs dominate Cannmart revs and will likely continue to outpace moving forward as they both have online services as well.

Labs will have better margins but that's no longer a short term goal.  I can't see them breaking 20% any time soon, nor can i see them generating enough revenue to get breakeven in 2021.

I really appreciate the thought and effort you put into your post, it's nice to have someone with a brain between their ears to discuss this with.

Oban1kenobi wrote: OK so Im back....Done a little more reading and Random I apologise for not knowing/utilizing the proper terms/definition of  "Gross profit margins" 

 

from what I read in their last financial statement, their "gross profit margins" are approx 7%....On mainly Dried cannabis ? 

 

NAMASTE's current operating expense is approx. 7 million per quarter and this should remain relatively stable meaning they will have "net profit margins" quicker than we realise (meaning net profits not break even).

 

All things relative, unlike most LP's in the cannabis sector right now, Namaste's business model will ensure MUCH lower incurred expenses as the company grows, since they do not require the same building setups/ grow labs/ security setups/equipment / realty etc.  the logistics of this business model is entirely different than currently operating LP's (brick and mortar ?).  
 

As they continue expanding their business and producing their "own" product line, not only will their "gross profit margins" increase but their  "net profit margins" will increase exponentially due to the fact that their expenses will not increase at a relative rate to their revenue (as they transition into other things), as compared to a similar company in the same field (Cannabis) ......there are great benefits of not "owning that physical" store, but being that "virtual store".

 

in the very near future, once Cannmart LABZ is up and running, I believe that their Gross profit margins for "processed" cannabis will be well above the 40% mark, factor in existing dried cannabis sales and they will be in that 30-40% gross profit margin area near term... in fact as they continue to grow and expand, their "Net profit margins" will hit and can exceed 40% due to their business model (e-commerce) and due to relatively stable and expected expenses. 
 

Again as their Revenue increases, their expenses do not increase in the same manner.  for e-commerce, Revenue and Expense variables are not directly linked as they are normally in the standard business model for brick and mortar shops. 
I believe this is why Namaste's business model is not fully appreciated/understood by the masses, e-commerce is a fairly new space. " first online retail transaction occurred in 1994".  and throw in the mix, cannabis (a brand new industry). 

 

As we see with the recent news, Namaste's business model allows them to easily transition into new and emerging markets very easily.  The company has developed a "template" so to say, and their methodology can be implemented into practically anything. 

 

If one is being fair and looks at NAMASTE's expenses, it has in fact remained fairly constant over the quarters, in fact expenses have dropped...(I am personally keeping my eye on Salaries)

 

Canopy recently just announced their financials today and in comparison, to compare apples to apples, they had a revenue for "medical cannabis in Canada" of approx. 14 million vs Namaste's 6.3 million.....if we are comparing strictly the cannabis medical environment I am pretty sure that Namaste does not have "only 0.5%" of the medical market. so with the size and backing that Canopy has, it seems that NAMASTE is doing alright ??

Furthermore Canopy is declaring massive losses.  as a whole their losses are not proportional to that of NAMASTE, I understand that Canopy has some heavy players backing them, but their operational losses keep growing, Namaste's keeps shrinking.... Share price does not reflect that nor future considerations for NAMASTE.

 

In a previous post I gave some simple numbers regarding Namaste sourcing Cannabis at approx 7 dollars a gram (utilizing improper terminology of Profit margins).  I believe I saw a post yesterday indicating Namaste selling cannabis for just over 3 dollars a gram meaning they are sourcing it for less....This cost of Cannabis is becoming a little more realistic in terms of cost to grow.... and if you are processing 3 dollar a gram cannabis then your profits just increased again because the processed goods do not need to be sold for less just because you sourced it for less. 

 

Anyone can grow great cannabis, not everyone can process it ;) 

 

cheaper sourcing = greater profits

lower overhead = greater profits

great products = greater profits

Namaste = great foundation = greater profits.....had to throw that in there....cause its true :)