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Marijuana Company HEXO Slashes 200 Jobs

By Joe Tenebruso - Updated Oct 24, 2019 at 6:02PM

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Lower projected revenue is forcing it to restructure its workforce.

October has been a brutal month for HEXO (HEXO -8.41%). On Oct. 4, the cannabis producer's chief financial officer resigned. Apparently, HEXO didn't realize that hiring a U.S.-based CFO wasn't the best choice for a Quebec-based company.

Then on Oct. 10, HEXO announced preliminary fourth-quarter results. Investors punished its stock after the company said it expected net revenue of only $14.5 million to $16.5 million, which was well below its prior guidance. "While we are disappointed with these results, we are making significant changes to our sales and operations strategy to drive future results," CEO Sebastien St-Louis said at the time.

A folded dollar bill next to a declining stock chart

Image source: Getty Images.

On that same day, HEXO also withdrew its financial forecast for fiscal 2020. The company said regulatory uncertainty surrounding cannabis derivatives made it impossible to accurately predict its results for the coming year. "Withdrawing our outlook for fiscal year 2020 has been a difficult decision," St-Louis said. "However, given the uncertainties in the marketplace, we have determined that it is the appropriate course of action."

He went on to suggest that HEXO was considering cost cuts: "We are also placing a greater focus on profitability. We are evaluating our plans and operations to see where we can be even more efficient."

We now know what those cost cuts will entail. HEXO announced today that it is "rightsizing its operations" and reducing its workforce. Approximately 200 people will lose their jobs, including chief manufacturing officer Arno Groll and chief marketing officer Nick Davies. 

"This has been my hardest day at HEXO Corp.," St-Louis said in a press release. "While it is extremely difficult to say goodbye to trusted colleagues, I am confident that we have made sound decisions to ensure the long-term viability of HEXO Corp."

St-Louis said that the job cuts would help to better align the company's cost structure with the amount of revenue it expects to generate in 2020. He noted that regulatory delays, slower-than-expected store openings, and pricing pressure on some cannabis products are all expected to weigh on results in the coming quarters.

HEXO is scheduled to release its complete fourth-quarter financial results on Oct. 28. Its earnings conference call is Oct. 29 at 8:30 a.m. EDT, during which management may provide further commentary on cost reductions and operational plans for the year ahead.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends HEXO. The Motley Fool has a disclosure policy.

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