Beacon Securities analyst Russell Stanley has dropped his target on US cannabis multi-state operator Acreage Holdings (Acreage Holdings Stock Quote, Chart, News CSE:ACRG.U) but he said in a new update to clients on Tuesday that the company’s recent moves to cut costs and improve profitability are prudent given the current economic environment.
New York-based Acreage, which has cultivation, production and retail operations in the US including interests in 20 states, announced last Friday a number of measures aimed at addressing the current COVID-19-influenced business environment along with more cannabis-specific trends and “other uncontrollable factors that have greatly shifted the cannabis landscape,” according to management.
The company has furloughed 122 employees from both the corporate office and field operations, temporarily closed some operations including a dispensary in Maryland and one in North Dakota, closed wholesale operations in Iowa, and closed its Form Factory operations in California, Oregon and Washington.
Acreage has also converted its dispensary in Queens, NY, to a delivery hub and terminated the pending acquisition of a dispensary in Rhode Island.
As well, Acreage said it will be terminating the planned acquisition of Deep Roots Harvest, a private Nevada company which was set to be bought for US$120 million including US$20 million in cash and US$100 million in stock.
CEO Kevin Murphy said despite the difficult times, he is optimistic about the US cannabis industry and about Acreage, in particular.
“But as a result of the COVID-19 pandemic, we have made the very difficult decision to furlough several of our employees and close certain facilities while we navigate through the crisis. Additionally, we withdrew from certain agreements with Deep Roots and Greenleaf as circumstances have materially changed. These bold measures will help to ensure that we emerge from this very challenging situation stronger than ever before,” Murphy said