Value Buds' sales up over 120% since
conversion
EDMONTON, AB, May 17, 2021 /CNW/ - Nova Cannabis Inc. (the
"Company" or "Nova") (TSXV: NOVC) today released its
unaudited condensed interim consolidated financial statements (the
"interim financial statements") and management's discussion
and analysis for the three months ended March 31, 2021.
"Nova has been executing its growth strategy to bring everyday
value for real cannabis consumers through the Value Buds banner,"
said Darren Karasiuk, CEO of Nova.
"The increase of over 120% in the sales from the first 18 stores
we've converted to Value Buds in the last few weeks is evidence of
our strategy's effectiveness. As Alcanna experienced with their
Deep Discount trial stores in 2020, we expect further increases in
sales in the coming weeks and months as more consumers in those
trade areas discover our value proposition and as we expand the
Value Buds footprint through more conversions and new store
openings."
"Nova now has 53 stores operating and a further 30 stores in
development, with the majority scheduled for completion in 2021.
This is exclusive of a number of other potential sites that we are
evaluating, and we continue to lever Alcanna's relationship with
national landlords to identify store locations that we believe
represents sustainable value. We plan to build one of the largest
retail cannabis footprints in Canada, but what we believe sets us apart is
our strategic focus on the high-volume value-conscious consumer and
our ability to offer a truly better alternative to the illicit
market."
Business and Operating Highlights:
- Converted eighteen (18) stores from either the Nova Cannabis or
the Deep Discount Cannabis banners to the Value Buds banner in
Alberta in Q1 and to date in Q2
2021.
- Early performance from the stores converted to the Value Buds
banner have already seen, on average, transaction count and sales
increases of in excess of 120% compared to the period before
conversion:
-
- Increased sales under the Value Buds banner were realized at a
gross margin as a percentage of sales of approximately 19% compared
to approximately 32% in the period before conversion; and
- As we continue to increase the number of Value Buds locations
and introduce this banner to more customers, we anticipate that our
gross margin as a percentage of sales will blend out to be
approximately 12% to 15% in the second half of 2021 and we
anticipate that the sales increases already realized to date will
continue and possibly accelerate.
- Currently, thirty (30) new stores are under
development/construction – nineteen (19) in Ontario and eleven (11) in Alberta; most are expected to open in the
second half of 2021. In addition, Nova has another thirty (30) new
store locations in Ontario under
active negotiation.
- To date in May, converted Nova's original Ontario store on Queen
Street West to Value Buds and opened one (1) new Value Buds
store at Bloor and Lansdown in Toronto,
Ontario.
Outlook
The Company expects to adopt an aggressive and disciplined
stance toward growth focusing on:
- Organic store openings
- Opportunistic and sensible acquisitions to complement organic
growth
- Same-store sales growth
- Private label
- Basket size growth
When it comes to both organic growth and acquisition
opportunities, the Company is focused on store locations that have
long-term viability. Management recognizes that in Ontario, due to its historically slow retail
cannabis store rollout, many existing cannabis retail locations
have enjoyed monopoly-like positions in very large trade areas.
These monopolies have provided many cannabis retailers with
revenues that we believe are unsustainable with greater competition
and vulnerability to new retailers who can offer better pricing as
well as traditional retail fundamentals such as visibility,
parking, and proximity to other customer draws.
Additional store conversions to the Value Buds banner will
continue in Q2 and Q3 2021. Store banner conversions from the
legacy banners of YSS and Sweet Tree to our new discount-focused
banner, Value Buds, have been delayed by the world-wide microchip
shortage resulting in longer than expected lead times to acquire
point-of-sale hardware and other equipment necessary to properly
operate the stores as Value Buds; however, we believe that these
conversions will be substantially completed in Q3 2021.
First Quarter 2021 Financial Highlights:
The interim financial statements for the three months ended
March 31, 2021 reflect the results of
the thirty-four (34) stores formerly owned by Alcanna Inc. as well
as the results from the nineteen (19) stores owned by the Company
(when it was known as YSS Corp.) for the 10 days from the closing
of the reverse take over transaction until the end of the quarter.
As such, they are not reflective of the Company's operations as it
exists today or as it existed in the first quarter of 2020. During
the first quarter of 2020, the stores were largely operated under
the Nova Cannabis banner with a different operating, pricing and
margin strategy than in the first quarter of 2021. Refer to the
interim financial statements and the management discussion and
analysis (the "MD&A") of the Company for the three months ended
March 31, 2021, which are available
from the Company's profile on SEDAR, at www.sedar.com, or on the
Company's website at www.novacannabis.ca.
UPDATE TO THE COMPANY'S BYLAWS
Nova also announced that its Board of Directors approved the
adoption of a new By-Law No. 1 to reflect recent amendments to the
Business Corporations Act (Alberta), including appointing an Agent for
Service and removing the requirement that 25% of the Board be
resident Albertans. In addition, the new By-Law No. 1 authorizes
the Directors to set the size of the board, modernizes the by-laws,
simplifies provisions for ease of understanding and application,
and adds an Advance Notice Provision, which sets a deadline by
which the Company's shareholders must notify the Company of an
intention to nominate directors prior to any meeting of
shareholders at which directors are to be elected and specifies the
information that a nominating shareholder must include in the
notice in order for director nominees to be eligible for nomination
and election at the meeting. These changes are subject to
shareholder confirmation at the upcoming Annual and Special Meeting
of shareholders of the Company.
CONFERENCE CALL
Management of Nova and Alcanna Inc., a majority shareholder of
Nova, will conduct a joint conference call on May 18, 2021 at 12:00 p.m.
ET (10:00 a.m. MT) to discuss
their respective financial results. To participate, please dial
(416) 406-0743 or (800) 806-5484 and use the required participant
access code: 3518326#. The playback will be made available
approximately four hours after the event at (905) 694-9451 or (800)
408-3053, required access code: 1361632#.
ABOUT NOVA CANNABIS INC.
Nova is one of Canada's largest
and fastest growing cannabis retailers with a goal to disrupt the
cannabis retail market by offering a wide range of high-quality
cannabis products at every-day best value prices. The Company
currently operates 53 locations across Alberta, Ontario and Saskatchewan primarily under its Value Buds
and Nova Cannabis banners. The Company is majority owned by Alcanna
Inc. (TSX: CLIQ).
Nova's common shares trade on the TSX Venture Exchange under the
symbol "NOVC".
Additional information about Nova Cannabis Inc. is available at
www.sedar.com and the Company's website at
www.novacannabis.ca.
FORWARD LOOKING STATEMENTS
This news release contains forward-looking statements or
information (collectively "forward-looking statements")
within the meaning of applicable securities legislation.
Forward-looking statements are typically identified by words such
as "continue", "anticipate", "will", "should", "plan", "intention",
and similar words suggesting future events or future performance.
All statements and information other than statements of historical
fact contained in this news release are forward-looking statements.
In particular, this news release contains forward-looking
statements pertaining to: Nova's retail cannabis business strategy,
including organic growth and strategic acquisitions; Nova's
discount pricing model; the conversion of Nova Cannabis stores to
the Value Buds banner and the timing thereof; the Company's 2021
objectives, including planned construction of new stores, timing of
new store openings, evaluation of potential sites and sales growth,
particularly in the Value Buds banner; the ability of the Company
to obtain government licenses for its new stores; Nova's gross
margin as a percentage of sales and sales forecast for the balance
of 2021; and expectations as to consumer demands.
With respect to forward-looking statements contained in this
news release, the Company has made assumptions regarding, among
other things: the Company's ability to identify locations for,
construct and open new stores and the cost related thereto; the
availability of hardware and equipment for those stores; government
regulation and applicable laws will not change in a manner adverse
to the Company; receipt of necessary regulatory approvals to open
new stores; the Company's ability to obtain leases for new sites
and attract the necessary personnel to operate new stores; the cost
of converting existing stores to the Value Buds banner; demand for
the products the Company sells; other factors that will drive sales
growth in the Value Buds banner; availability of acquisition
opportunities; sustainability of competitors' businesses and
competition in the retail cannabis industry, including from the
illicit cannabis market; consumer demands; and factors that
influence consumer behavior.
Although the Company believes that the expectations reflected in
the forward-looking statements, and the assumptions on which such
forward-looking statements are made, are reasonable, especially
given the unprecedented uncertainty of the full extent and impact
of COVID-19, there can be no assurance that such expectations and
assumptions will prove to be correct. Readers should not place
undue reliance on forward-looking statements included in this news
release. Forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties that
may cause actual performance and financial results to differ
materially from any estimates, forecasts or projections. These
risks and uncertainties include, among other things, the duration
and severity of the COVID-19 pandemic on the business, operations
and financial condition of the Company; the risk that Nova will be
unable to execute its strategic plan and growth strategy, as
planned without significant adverse impacts from various factors
beyond its control; dependence on suppliers; potential delays or
changes in plans with respect to capital expenditures and the
availability of capital on acceptable terms; risks inherent in the
retail cannabis industry; competition for, among other things,
customers, supply, capital and skilled personnel; changes in labour
costs and markets; incorrect assessments of the value of
acquisitions; general economic and political conditions in
Canada (including Alberta and Ontario), and globally; industry conditions,
including changes in government regulations; fluctuations in
foreign exchange or interest rates; unanticipated operating events;
failure to obtain regulatory and third–party consents and approvals
when required; changes in tax and other laws that affect us and our
shareholders; the potential failure of counterparties to honour
their contractual obligations; stock market volatility; and the
other factors described in the Company's public filings available
at www.sedar.com. Readers are cautioned that this list of
risk factors should not be construed as exhaustive.
The forward-looking statements contained in this news release
are made as of the date hereof. Except as expressly required by
applicable securities legislation, Nova does not undertake any
obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise. The forward-looking statements contained in this news
release are expressly qualified by this cautionary statement.
NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES
PROVIDER (AS THAT TERM IS DEFINED IN POLICIES OF THE TSX VENTURE
EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF
THIS RELEASE.
SOURCE Nova Cannabis Inc.