Curaleaf Holdings, Inc. is closing the majority of its operations in California, Colorado and Oregon, citing the “difficult operating environment” in these states.
Curaleaf will exit its production and cultivation facilities in California, Colorado and Oregon. The company said these markets have contributed to the growth of Select and its other wholesale brands, but it will instead focus on cash generation in its revenue-driving markets moving forward.
Curaleaf began closing facilities and reducing its workforce in California, Colorado and Oregon last year, pointing to “recent legislative decisions, price compression and lack of enforcement of the illicit market.” The company noted these markets contributed less than $50 million in revenue in 2022.
The company also announced plans to consolidate cultivation and processing operations in Massachusetts to its facility in Webster, resulting in the closure of its Amesbury facility. Curaleaf said it expects to record non-cash restructuring and impairment charges that it will detail on its fourth quarter earnings call in March.
With these actions, Curaleaf has reduced its payroll by 10%. Coupled with other cost-cutting measures, the company expects to see $60 million in gross run-rate expense savings in 2023, exceeding its initial savings target by 50%.
"Today's announcement reflects a decision that we did not arrive at lightly, and one that makes sense for our business at this time," said CEO Matt Darin. "We have a fiduciary responsibility to our shareholders to improve margins and fortify our balance sheet by controlling what we can in our business. 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. We are confident that these moves, made to improve our cash flow and margins, are the right ones to bolster the future success and profitability of Curaleaf. Optimizing the existing portfolio in this way allows us to enter 2023 in a position of strength and further enhances our visibility around continued margin expansion and highly profitable growth. We remain excited about our future growth prospects both domestically and internationally, and now can devote greater resources to tangible growth opportunities in emerging markets such as Europe."