MedMen Makes a Beeline for Florida

MedMen Enterprises Inc () has announced plans to open 12 dispensaries in Florida during 2019 as part of a nationwide expansion drive.

It is set to open 16 new locations this year and three-quarters of them will be in the Sunshine State, putting it on a collision course with local market leader Trulieve. The Florida Department of Health estimates that Trulieve accounts for between 60% and 80% of marijuana sales in the state, as it has 24 dispensaries there.

MedMen purchased PharmaCann for $682 million in October 2018 and that deal made it the biggest cannabis company in the U.S.

Liberty Health Sciences Inc. is also expanding ambitiously across Florida and it will open its latest dispensary in Orange Park, Florida, on March 1. Competition is really heating up in the state and the arrival en masse of the largest U.S. cannabis firm will intensify that situation significantly.

MedMen purchased PharmaCann for $682 million in October 2018 and that deal made it the biggest cannabis company in the U.S. Grizzle revenue estimates suggest that it is just ahead of Acreage, CuraLeaf, and Trulieve as the largest U.S. pot stock by revenue.

MedMen Q2 Results

MedMen posted its Q2 financial results after the markets closed on Feb. 27, showing that revenue rose 871.8% year-on-year from $3.1 million to $29.9 million. It also represented a 39.1% increase on Q1 of the current financial year. Overall profit margins increased from 45% to 53%. However, its losses widened to $65 million as it continued to burn cash. At its current burn rate, it only has approximately one year of cash left.

The rate at which MedMen is burning cash could be a cause for concern among investors.

Chief executive Adam Bierman said: “Our strong second quarter results support MedMen’s commitment to drive strong retail and sales performance… As we emphasized last quarter, we are in a new phase of growth, one focused on continuing to operationalize our industry-leading retail footprint and increasing our profitability.”

MedMen’s share price closed at C$4.31 on Feb. 27 before the results were revealed, and then opened at $4.37 on Feb. 28. However, within half an hour of trading, it had decreased to $4.14. The rate at which it is burning cash could be a cause for concern among investors, contributing to this decrease.

The Florida Competition Heats Up

By the close of Q2, the firm operated 16 retail stores, eight of which are located in California. It reported revenue of $23.7 million from those stores in the 13 weeks to Dec. 29, 2018. California charges 15% tax to operators and it brought in $50.8 million during the quarter, which translates to a retail market worth around $338.7 million, giving MedMen a 7% market share.

It opened a flagship store in Las Vegas during the quarter, and it is now present in Arizona after purchasing Monarch in December. MedMen is now set to double its estate and it clearly views Florida as a significant prize.

The state has the potential to become one of the largest medicinal cannabis markets in the country, as it has the highest proportion of people aged 65 and older. Chronic pain is commonplace among this demographic and it is expensive to treat, so medicinal marijuana has the potential to grow increasingly popular. Plans are also underway to legalize cannabis for recreational use in Florida, so it could become a huge market for recreational weed use too.

In other developments, MedMen hired Michael Kramer as chief financial officer during the quarter. His predecessor is suing the company after alleging insider enrichment without transparent disclosure, excess spending, and a hostile working environment.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Martin Green
Martin Green is an experienced journalist with a strong focus on the cannabis, alcohol, and gambling industries. He is particularly interested in the political issues affecting the global marijuana trade, and he has a keen focus on regulation changes and legal topics. He holds a BA English Literature, MA Creative Writing and a National Qualification in Journalism diploma. He has worked in journalism since 2009 and written for a broad range of newspapers, business titles and magazines, including The Sun, The Metro, The Journal, Livestrong, Drinks Retailing News, Harpers, Sportsbook Review, Vital Football, Essex Live and Surrey Live. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.

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