November through January Sales Trends
Although sales declined in November that can mostly be explained by the nuances of the calendar year, with November 2020 having one less weekend than the prior year. After examining like-store sales in Alberta, British Columbia, Ontario, and Saskatchewan, we found sales partially recovered in December with sales through the holidays seeing mostly strong growth. However, sales were weak in the last week of December and first two weeks of January in all markets as consumers faced lockdowns due to COVID.
November sales decline (compared to October)
On average, one less weekend can cause a -2% month-over-month (MoM) drop and one less calendar day can cause a -1% MoM drop. This means November 2020 would be -3% in the hole simply because of the calendar. Comparing this period to October-November 2019 can also be misleading because November 2019 had five weekends and October 2019 had four, which gave November 2019 a +2% advantage. Furthermore, most of the Oct-Nov 2019 growth was driven by British Columbia alone (due to increased licensing in BC), without which the Canadian market would have already been up by +1% from the one extra calendar day.
January sales weaker
Sales in the first three weeks of January were relatively soft, though we should bear in mind that most stores were closed on January 1, making that week a 6-day week. That day also happened to be a Friday, the strongest day of the week for cannabis sales. Sales continued to trend downward in week 1 and 2, but in Alberta and Saskatchewan sales slightly rebounded in week 3. Lockdowns continued to negatively impact sales in Ontario, but sales declines have not been as sharp as those experienced in the early summer months. Buy-in (or orders from retailers to producers) may be impacted over and above sell-thru trends as we see Ontario inventory carry levels are declining. This means, orders likely saw larger declines than sales trends are demonstrating.
This softening of sales in December and January trickled through to licensed producers (LPs), especially in Ontario, as we find that retailers have been drawing down their inventory with average inventory levels sitting at 70-80% their normal levels in Ontario. Ontario retailers likely reduced their orders due to fears of large decreases in consumer demand during lockdowns (drawing on past experiences in April and May). Thus, while consumer demand has been weak in Ontario in the early winter weeks, we anticipate orders to LPs to show even larger negative trends due to the decreased inventory levels as retailers are not replenishing products purchased at 100%. This trend of selling down inventory seems to have stabilized in the later weeks of January and we expect more normal purchase patterns from retailers in the future.