It looks like the 2023 layoff trend is spreading to the cannabis industry. Canopy Growth (NASDAQ:CGC) recently reported third-quarter earnings, revealing a disappointing period marked by declining revenue. The company cited increasing competition throughout the sector for its difficult year, during which CGC stock fell by more than 70%. Now, Canopy Growth is focused on making changes as it looks toward the new year.
Specifically, this means restructuring activities for the company in the form of layoffs. Canopy is planning on eliminating roughly 800 jobs. The Canopy Growth layoffs are part of a larger plan for the firm to reduce operating costs and become profitable again.
Does this mean that Canopy will be among this year’s cannabis winners? Let’s take a closer look at the news and what investors should expect.
Inside the Canopy Growth Layoffs
CGC stock has been falling all day on news of Canopy’s earnings miss and layoff plans. But it should be noted that the Canopy Growth layoffs aren’t the only part of the company’s plan. According to Reuters, the firm has been exiting some international markets, closing stores and divesting from the retail part of its business. The next phase of its restructuring initiative centers around laying off an initial 40% of its workforce in an attempt to avoid further losses. In total, the company plans to cut its headcount by about 60% across the business.
Per Seeking Alpha:
“Net revenue declined -28.2% Y/Y to C$101.2M, mainly due to increased competition in the Canadian adult-use cannabis market, the divestiture of C3 Cannabinoid Compound Company GmbH (C³), a decline in its U.S. CBD business, and softer performance from Storz & Bickel and This Works.”
Clearly, Canada’s economy isn’t shifting in favor of companies like Canopy. Cannabis producers saw some growth in 2022 as investors eyed possible federal legalization in the United States. Since then, though, little progress has been made and cannabis stocks have dipped back into the red.
As InvestorPlace contributor Joel Baglole noted in December, Canopy has reported rounds of job cuts and restructuring plans already. These initiatives haven’t spurred growth so far, so this latest round of layoffs may be no different.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.