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(Reuters) -Trulieve Cannabis Corp posted a bigger-than-expected fall in first-quarter revenue on Wednesday, as demand for pot and related products weakened amid rising recession fears and increased competition.
Shares of Trulieve fell nearly 4% to C$6.88 in morning trade, having fallen almost 33% so far this year.
Recent banking failures and interest rate hikes have raised fears of the U.S. economy tipping into recession, prompting many customers to cut back on spending, especially on recreational products including cannabis.
Pot producers are also struggling with lower pricing, increased competition and higher input costs, amid a lack of access to capital and the banking system.
“The company experienced increased competition and promotional activity in certain markets, including Florida, Pennsylvania and Massachusetts,” Trulieve said in a statement.
The company’s gross margins declined to 52% in the January-March quarter from 57% a year earlier and Trulieve said it expects to see pressure throughout the year.
“There’s pricing compression in the market… quite frankly, just wallet pressure and that they’re (customers are) spending less on a per-visit basis,” Trulieve CEO Kim Rivers said on a post-earnings call.
She also said operational improvements, inventory reduction, and cash generation will be non-linear throughout 2023.
The Florida-based company’s net loss doubled from a year earlier to $64 million in the March quarter, with operating expenses up 8% at $163 million.
Revenue fell 9% to $289 million, missing analysts’ average expectations of $293 million, according to Refinitiv data. The company said the fall was due to a decline in both retail and wholesale revenues.
Trulieve said its first-quarter customer retention was 54% and 73% in medical-only market, adding that near-term growth opportunities include new market expansions.
