Canopy Growth Prepares 5 New Stores in Ontario

One of the retail divisions of Canopy Growth (NYSE:CGC,TSX:WEED) has secured five additional locations in Ontario.

On Thursday (November 28), Tokyo Smoke, the subsidiary of the marijuana company, confirmed it’s set to open these stores after securing deals with winners of the Ontario lottery for retail licenses.

According to the cannabis retailer, these lottery winner partners are at the public stages of the entire store opening course.

Mark Zekulin, CEO of Canopy Growth, told investors this marks the first time the company’s retail umbrella has expanded to the north of the Greater Toronto Area; the company also obtained two additional stores in the city of Toronto. “As a company we are pleased to see this progress in the Ontario retail market,” said Zekulin.

The company indicated if all stores open it would bump the number of open stores managed by Canopy to a total of 32.

Marijuana companies — especially those with the backing of the public markets — have had a keen interest in the roll-out of retailers in Ontario as a way to expand the sale points for products.

A variety of public companies were able to crash into the opening of the Ontario retail market back in April by way of partnership deals with the winners of the lottery created by the provincial government.

Ontario followed through with two rounds of its much-maligned lottery. However, the province faced pressures because of its slow roll-out having lead to a limited amount of stores, including pressure from licensed producers (LPs) trying to obtain more stores.

In October, the Cannabis Council of Canada issued a letter to Ontario Premier Doug Ford requesting more stores in the province as a way to help the overall marijuana industry in Canada.

The letter was signed by a collective of publicly traded marijuana company leading executives, including Zekulin.

A report from BNN Blomberg indicated the province is ready to move on from the lottery system. Ford said the goal for the province is to open the entire system for retailers to apply and open stores with consumers dictating the successful businesses.

The premier has said the low supply of cannabis prevented the government from opening the entire retail system. “But I guess the previous issues that the whole country saw … we didn’t have enough cannabis to sell but now there’s enough supply and we’re working hand-in-hand with the (licensed producers),” Ford said.

In their letter, the cannabis executives disputed the viability of the low supply as a way to prevent the full-fledged privatization of the retail market in Ontario.

“There is ample supply of cannabis for the adult recreational market — there simply is no longer a shortage,” the letter read.

In its most recent earnings report, Canopy assigned some of the blame to its stunted growth in Canada to the limited number of stores in Ontario.

“We do not believe at this time that there will be sufficient points of retail sales in the near term to unlock the necessary Q4 demand,” said Zekulin, as the company was forced to cut back its own revenue projections.

On Thursday’s trading session in Toronto, Canopy opened at a price of C$25.21 and had seen a rise of 3 percent as of 10:36 a.m. EST. Over a year-to-date period, the company has faced a decline in value of 34.34 percent, consisting of a loss per share of C$13.49.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.