Culver City-based cannabis retailer MedMen Enterprises Inc. will lay off more than 190 employees and restructure business assets in a bid to achieve a positive balance sheet by the end of calendar year 2020.
“We have a clear plan to increase our market share, while at the same time enhancing our margins and reducing our corporate overhead,” Chief Executive Adam Bierman said in a statement. “Given market conditions, capital allocation is more critical than ever.”
The company announced Nov. 15 that it aims to net up to $22 million from the sale of non-core assets including a stake in a real estate investment trust named Treehouse.
MedMen formed the REIT in late 2018 with Venice-based investment firm Stable Road Capital to manage cannabis retail and cultivation properties. It has already earned $7 million from a partial sale of the Treehouse and is in the process of selling the remainder of its stake. It expects to bring in a total $14 million from the sale.
MedMen will also begin to limit new retail locations. Currently the company operates 33 stores across nine states. It holds 70 licenses to operate retail stores.
Under the new plan, MedMen will not open stores in 2020 unless it believes the location will generate more than $10 million in revenue during its first year of operation.
The firm will also delay investments in certain medical-only markets that aren’t as lucrative as recreational markets, such as New York and Arizona.
“As regulations shift, the company will re-evaluate additional investments,” MedMen noted in a statement.
The moves put a hold on roughly $55 million in capital expenditures related to building out new retail locations.
As part of its divestiture from certain markets, MedMen said in a statement that it will work with Canaccord Genuity Corp., a Canadian cannabis-focused financial services firm, to “explore strategic alternatives for certain operations and licenses in states that are currently deemed not critical” to its retail footprint.
Since its 2010 incorporation MedMen has made several venture investments in cannabis brands and dispensaries, including Long Beach-based dispensary One Love Beach Club and Echo Park-based cultivator Old Pal Group.
As part of the restructuring, MedMen will sell its stake in most of the brands it backed over the last 18 months. It expects to earn roughly $8 million from the moves.
Additionally, MedMen wants to reduce corporate spending, which totaled $154 million in its December 2018 quarter. To do so the company will lay off more than 190 employees, 20% of them at the corporate level. The company estimates these layoffs will save $10 million annually.
“While it is never easy to let employees go from the MedMen family, we believe this decision is in the best interest of our Company as we position ourselves for growth in the years ahead,” Bierman said. “We thank everyone for their hard work and dedication to MedMen, and we will now set our sights on achieving positive EBITDA by the end of calendar year 2020.”
The state Employment Development Department said it had not received any Worker Adjustment and Retraining Notification paperwork from MedMen as of Nov. 15.
MedMen’s traditionally high technology and marketing budget will also be scaled back, aiming to save $20 million annually through reducing its spend in those areas.
MedMen reported fiscal 2019 earnings Oct. 28 (its fourth quarter and fiscal year ended June 30) and noted mounting losses. The company reported $130 million in annual revenue against net losses of $277 million for fiscal 2019. Although revenue increased 227% from 2018, MedMen’s losses increased from $113.8 million to $277 million.
MedMen will report fiscal first-quarter earnings on November 26. The company's stock dropped roughly three points on the Canadian Stock Exchange at market close to $1.30 per share.
Tech reporter Samson Amore can be reached at (323) 556-8335 or firstname.lastname@example.org. Follow him on Twitter @samsonamore.
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