Canopy Growth Shares Jump After Cost-Cutting Measures Announced

Shares of Canopy Growth (NASDAQ:CGC) (TSX:WEED) have gained 14% in the past week after the cannabis grower publicly outlined a series of cost-reduction actions in an effort to accelerate its path to profitability.

The marijuana stock closed Monday at US$6.05 on the NASDAQ, gaining almost 6% on the day.

Canopy Growth Weekly Chart.

Canopy officials said the Canadian-based company aims to shave C$100 million (US$77.6 million) to C$150 million (US$116.4 million) in cost from its operations within the coming 12 to 18 months.

Although the statement issued by the company admitted that some of the measures announced would result in staffing cuts, it did not specify how many jobs would be eliminated.

A report in The Globe and Mail, however, confirmed the Canadian-based marijuana grower would lay off 250 people—or about 8% of its workforce. None of the company’s facilities would be closed to meet the job cut targets, the report stated. Rather the reduction in staff would be the result of a reorganization.

The latest announced job cuts are in addition to the 75 positions eliminated at one of the company’s largest facilities in Ontario last May, and the 220 positions eliminated the previous year.

One of the aims of the measures announced is to lower the “per-gram cultivation costs” by increasing “cultivation-related efficiencies and facility improvements.” No other specifics on how that would be achieved, however, were mentioned.

Canopy also aims to improve contract manufacturing of some products.

Said Canopy Growth’s Chief Financial Officer Judy Hong in a statement:

“The savings and operational efficiencies generated through these additional steps reinforce our commitment to driving Canopy to profitability."

At Canopy’s last quarterly earnings report, for the three-month period that ended Dec. 31, 2021, the company reported a net loss of C$115.5 million, down from a net loss of C$829.3 million in the same period of the previous year.

Revenue was down 8%. The company also reported it had drastically cut its operating expenses to C$161 million compared with C$578 million in the same period the previous year.

Said Canopy Growth CEO in a statement:

“To realize profitability and power growth, we are taking critical actions to further evolve Canopy Growth into an agile organization with a clear focus on the areas where we have the greatest potential success. These necessary changes are being implemented to ensure the size and scale of our operations reflect current market realities and will support the long-term sustainability of our company.”

Despite the optimistic showing, shares of Canopy Growth are down almost 79% in the past year.