What happened
Tilray (TLRY 2.04%) stock slid by more than 6.3% on Thursday as of 10:26 a.m. ET, driven by a worse-than-expected downward revision to the national consumer spending figures in the U.S. for the first quarter of 2022. Whereas the initial personal consumption expenditures (PCE) statistic for Q1 indicated growth of 3.1%, the revised data published Thursday found that PCE only actually grew by 1.8%. A handful of other cannabis stocks are also declining as a result.
So what
Tilray is a consumer goods and cannabis company that competes in the U.S. via its Sweetwater Brewing beer business and its Manitoba Harvest business, which makes several hemp-based food and wellness products. That means a fraction of Tilray's base of revenue is directly exposed to the detrimental impact of declining consumer spending and sentiment. When people's wallets are getting crunched by inflation, discretionary goods like beer are liable to get cut from household budgets, which is likely to continue putting a dent in Tilray's top line.
Now what
Based on its latest earnings report from its fiscal third quarter of 2022, Tilray only derives about 23% of its quarterly net revenue from beverage and wellness products. The remainder of its revenue is derived from medicinal and recreational cannabis sales and distribution in Canada and the European Union. If consumer spending isn't weakening much outside of the U.S., it'll be able to continue growing even as a couple of its segments face headwinds.
On the other hand, if Canada's consumers are spending less, too, it'll be harder for the company to continue to expand its sales at the same pace as the last three years, during which its quarterly revenue grew by more than 60.9%.
