Cresco Labs Lowers Q4 Revenue Guidance As It Shifts To Owned-Brand Distribution In CA

Multistate cannabis operator Cresco Labs Inc. CL CRLBF reported Thursday it will exit agreements under which it has served as the exclusive distributor of certain third-party branded products in California. It will, however, continue to work with a small group of leading brands in the Golden State.  

The Chicago-based company noted that this move is the latest step in its multi-year strategy to boost profitability and shift toward owned-brand distribution.

This decision is expected to lower the company’s projected sales in the fourth quarter, which is why the company is adjusting its previous Q4 2021 revenue guidance to a range of $235 million to $245 million. Cresco reiterates its Q4 adjusted EBITDA guidance of at least 30% and gross margins in excess of 50%.

“California became a foundational state for Cresco Labs early in 2020, as we began operating the Continuum distribution platform to bring a curated portfolio of leading brands to California retailers.” Charlie Bachtell, CEO and co-founder of Cresco Labs stated. “Thanks to partnerships with top-performing brands like Kings Garden, we have achieved significant scale and penetration in the state. As we continue to implement localization strategies tailored to each state’s market dynamics, this decision will enable us to put our full weight behind our rapidly growing owned-brand portfolio in California, while also expanding profitability margins for our overall business. “

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Price Action

Cresco’s shares were trading 1.40% lower at $9.15 per share at the time of writing Friday morning.

Photo: Courtesy of Elsa Olofsson on Unsplash