MedMen Expanding Store Count In The Face Of Increasing Losses
Cannabis retailer MedMen Enterprises, which has operations in states where cannabis is legal either medicinally or recreationally or both, has opened two new retail stores in Florida, one each in Orlando and Tallahassee. Medical marijuana is legal in Florida.
The new stores bring MedMen's total number nationwide to 32 in nine states, though the company is licensed for 70 stores, totals that reflect its rapid recent growth.
A year ago, the company operated 15 retail stores in three states — California, Nevada and New York. In 2017, the total was seven stores.
MedMen's strategy is focused on retail growth.
"We look at cannabis retail like other disruptive industries such as ride sharing, music streaming, and vacation rentals, in which 'winning' companies such as Uber, Spotify and Airbnb have been able to capture outsized market share," CEO Adam Bierman wrote in an open letter to stakeholders in September.
MedMen, which is incorporated in Canada but headquartered in Culver City, California, reported recently that its fourth-quarter revenues came in at $42M, up 104% year over year, but also that it posted a net loss of $82.9M for the quarter. For all of fiscal 2019, the company reported a net loss of $277M, compared with a net loss in 2018 of $113.9M.
MedMen has also attracted its share of controversy. Early this year, for example, it was expelled from the New York Medical Cannabis Industry Association. The move came after MedMen's former chief financial officer, James Parker, alleged in a lawsuit that company executives created an environment that tolerated "racial, homophobic, and misogynistic epithets and slurs," as well as abuse of drugs and alcohol, the Motley Fool reports. MedMen denied the allegations.
Investors have been skittish about the company: a year ago, MedMen shares traded at about $4.50 and soon reached a high of more than $6/share. Now the company trades at just over $1/share.
Not all investors are reluctant to bet on MedMen, however. In March, Gotham Green Partners, a New York-based investor in the global cannabis industry, agreed to provide a senior secured convertible credit facility totaling as much as $250M to MedMen.
In July, MedMen took on another $30M in debt from Gotham Green Partners to continue its expansion, The Real Deal reports. MedMen said it would use the money to open more retail stores, including in states on the verge of allowing recreational cannabis sales, such as Illinois.
The company has also started non-store sales as part of its expansion. In August, MedMen rolled out statewide delivery service in California for its 400 or so cannabis products. The company said it will initially focus delivery service in California, where it already has 17 retail locations, but that it expects expansion nationwide eventually.
Of the 17 California retail licenses, 13 are operational as MedMen stores, including a recently opened MedMen Sorrento Valley location. The company has also been awarded a commercial retail license in Pasadena, California. MedMen expects to have a total of 30 operating retail locations in California by the end of 2020.
MedMen may also be able to take advantage of more states legalizing recreational cannabis. Ballot initiatives to do so may be voted on in Arizona, Florida and New Jersey in 2020, and other states look poised to legalize medical marijuana in the near future.