Bill Peters, Investors Business Daily
To boost margins and counter widening losses amid a rout in marijuana stocks, U.S. cannabis retailer MedMen on Thursday outlined a plan that looked a lot like any other chain’s.
During the company’s fiscal fourth-quarter conference call on Thursday — the first time MedMen has partaken in that quarterly corporate ritual — management said it could improve margins by negotiating better wholesale pricing from manufacturers.
Management also said it could bring more higher-margin products and its new in-house weed brand, called Statemade, to store shelves.
In addition, consumer data could help it find ways to upsell to shoppers on return visits, the company said. Location will help too, particularly in Las Vegas, where dispensaries can run all day and tourists and convention-goers look for ways to keep their evening going.
“There’s a good chance that that’s the highest foot traffic we see in the country,” CEO Adam Bierman said of Las Vegas during the call.
Even as people buy more things online, executives say physical stores still have a place in the marijuana business. During its call, MedMen praised its real estate division for navigating zoning restrictions to land prime locations.
MedMen has a store on Los Angeles’ Abbott-Kinney Boulevard near Venice Beach, where skaters, artists, bicyclists with Christmas lights on their wheels, and other well-tanned holdouts run up against the tech industry and marked-up menu prices at restaurants.
MedMen also opened a dispensary April 20 on Manhattan’s Fifth Avenue, with an all-white interior, palatial arches and overhead lights shaped like halos.
“Retail is the control point of our nascent industry,” Bierman said. “It is where new consumers experience cannabis products and where brands are built. It is also where customer loyalty is built.”
The company launched Statemade this month in one of its Las Vegas shops, with plans to eventually bring the brand to its other stores. Bierman said that some 40% of that store’s sales have been Statemade products.
Statemade products come in packaging similar to that of high-end makeup. Buds come in short, wide, copper-lidded jars similar to those that might contain cosmetic cream. Joints, vaporizers and drops come in tubes that resemble eyeliner or lipstick. As with other marijuana brands, the products are named and marketed according to the desired effect — Joy, Ebb, Zen, ZZZ, and the like.
MedMen Q4 Results
As other U.S. cannabis companies quietly amass more dispensaries and cultivation facilities, MedMen has gone in the opposite direction. Over the past year, the company’s advertising storm has tried to dispel “stoner” stereotypes while bringing elements of high fashion to cannabis consumption. The company said it spent $4.7 million on marketing and branding during its fourth quarter.
But MedMen’s net loss during the fourth quarter steepened to $78.7 million, compared with $7.35 million a year ago, amid a forceful effort to expand. Sales mushroomed to $20.6 million from $1.5 million a year ago and $14.3 million in Q3 as MedMen added more stores to its real-estate lineup.
For the year, net losses widened to $112.3 million from $15.4 million, as revenue surged to $39.8 million from $2.7 million. Expenses ballooned to $110.5 million from $15.7 million.
Still, MedMen this month said it planned to acquire PharmaCann in a $682 million all-stock deal. The acquisition would expand MedMen’s operations to 12 U.S. states. The deal would also give it a few dozen more stores to operate. As the investing website Equity Guru noted, the acquisition could also help MedMen justify its advertising and efforts to exert greater influence over suppliers.
That website also criticized what it characterized as an overly generous executive compensation plan for MedMen, revealed in a regulatory filing, disclosed in May, as it prepared to go public in Canada.