Charlotte’s Web: Turnaround ‘promising’ despite revenue drop

LOUISVILLE — Louisville-based CBD company Charlotte’s Web Holdings Inc. (TSX: CWEB) posted lower year-over-year sales in the second quarter of 2024, but the company said its turnaround strategy is working.

In early 2024, the company began implementing its “True North” turnaround effort, which aims to reestablish solid financial footing. The strategy involves rebuilding its e-commerce platform, reining in expenses, identifying efficiencies and emphasizing CW’s influential voice in the hemp industry. 

“Our strategic turnaround initiatives and innovations are yielding promising results towards a return to growth, despite lower revenue,” CW CEO Bill Morachnick said in a prepared statement. “During the second quarter, we successfully migrated to our new e-commerce platform, which has enhanced the consumer experience and provided more effective customer relationship management tools. The platform has been performing well.

“Our retail business has also shown improvement, delivering the first sequential second-quarter growth since 2021, supported by distribution gains, including with Walmart, as well as the successful launch of our new CBN Stay Asleep Gummies.”

Sales in the second quarter of this year fell to $12 million from $16 million in the same period last year. Both retail and web sales were down year over year. 

Growth in the broader CBD market was “stymied by ongoing headwinds in the category, including regulatory ambiguities at the federal and state levels and associated competitive alternatives causing retailer and consumer confusion,” the company said. 

Charlotte’s Web posted a net loss of $11 million in the most-recent period. That’s compared with a net profit of $2.8 million recorded in the second quarter last year. That positive financial position was achieved due to the formation of DeFloria LLC, a joint venture launched in mid-2023 with AJNA Biosciences PBC and British American Tobacco PLC.

“Following our first-quarter operating expense reductions, we took additional measures after the close of the second quarter to further align with current revenue levels,” CW chief financial officer Erika Lind said. “These prudent reductions are designed to decrease future cash burn and position us for positive cash flow as we return to growth. We expect a reduction in (selling, general, and administrative expenses) for 2024 of more than $20 million from 2023, effectively lowering our cash burn in the second half of 2024. With our newly refined cost structure, we would be able to achieve cash flow breakeven at approximately $65 million in annual net revenue.”Charlotte’s Web experienced a top-level shakeup of the organization in 2023 that resulted from a shareholder revolt last summer led by CW founders Jesse Stanley and Joel Stanley, who were dissatisfied with the way the company was being run.

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