This story has been updated to provide correct figures for the number of states Curaleaf operates in; also the number of total employees at the company.
Curaleaf said Thursday it has reduced its payroll by 10% as it exits California, Colorado and Oregon in the face of price compression and unchecked competition from the illicit market.
Curaleaf cut its work force by 500 people to bring its total staff to 5,500 from 6,000 people previously, according to a spokesperson for the firm.
Curaleaf
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will disclose non-cash restructuring and impairment charges for the action when it releases fourth-quarter earnings in March. The company will operate in 19 states, down from 21 currently.
“We believe these states will represent opportunities in the future, but the current price compression caused by a lack of meaningful enforcement of the illicit market prevents us from generating an acceptable return on our investments,” CEO Matt Darin said in a statement.
Curaleaf is seeing more sales traction in Florida, New Jersey, Illinois, Arizona, Pennsylvania and New York, Darin told MarketWatch in an interview. The company has been focusing on streamlining operations and moving to an asset-light structure for some time.
The job reductions will generate about $60 million in gross run-rate expense savings, which exceeds its target by 50%.
The businesses in the states it’s exiting generated less than $50 million in revenue in 2021, the company said. Curaleaf’s total revenue in 2021 was $1.2 billion.
Curaleaf will also consolidate cultivation and processing operations in Massachusetts to a single facility in Webster and close its Amesbury facility.
The moves come as the industry struggles with oversupply and competition from legacy growers.
Darin told MarketWatch in an interview that the company is seeing some early-stage progress from states cracking down on illegal cannabis by shutting down some operations, levying fines, targeting landlords and reviewing tax structures, but said it would take time to fully move past the illicit market.
“The lack of enforcement has created an unlevel playing field,” Darin said.
In New York City, for example, there are currently 1,400 stores where people can buy cannabis illegally, but only two licensed stores with more coming.
Illicit cannabis is often cheaper than legal cannabis because the price does not include any taxes, nor is illicit cannabis tested for mold or pesticides.
Yet officials have been sluggish to lock up any illicit cannabis operators because the failed war on drugs has shown incarceration for low-level cannabis offenses is not fairly executed.
Curaleaf stock is down 16% so far in 2023 compared to a loss of 8% by the AdvisorShares Pure U.S. Cannabis ETF
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Also Read: Cannabis stocks end a dismal year near all-time lows
