Goodfood is scrapping its plans for fast grocery delivery, as the Montreal company finds itself in a difficult financial position.
The ready-to-cook meal specialist announced on Friday that it is ending its 30-minute fast delivery service. “The ongoing operational investments that would be required to bring 30-Minute Deliveries to an attractive level of profitability would require significant additional capital expenditures and a significant increase in operating expenses,” management said in a statement.
The decision results in the closure of the company’s eight micro-distribution centers in Montreal, Toronto and Ottawa. The change in strategic direction will result in a charge of 45 million to 50 million in the fourth quarter.
The announcement is “surprising” and “abrupt”, reacts financial analyst Luke Hannan of Canaccord Genuity. “Given feedback from the company that made fast delivery the centerpiece of its strategy, investor confidence in management’s ability to execute its plan is likely to be eroded.” The action will be on the penalty bench for the foreseeable future. »
In early January, President and CEO Jonathan Ferrari said he was very optimistic about the potential for fast delivery in an interview with The Canadian Press. “We are doing a bit what pizzerias have done with delivery in 30 minutes at an affordable price, he gave as an example. We have an advantage over traditional grocers with our microcentres. They have lower rents, we are closer to our customers and we can deliver more quickly and efficiently. »
Mr. Ferrari predicted that the microcenters would enable him to add the equivalent of 1 billion in capacity by the end of the 2025 financial year with “as little” as 40 million in investments.
Credit terms
The company also indicated that it only had 38 million left in its coffers. In addition, the company missed a financial commitment over the summer and is trying to renegotiate certain terms with its creditors. “There can be no assurance that such an arrangement will be put in place and that it will be in a timely manner, and no guarantee can be given as to the terms of such an arrangement,” the company said.
The context is more difficult for Goodfood, which had benefited from the fact that people ate more at home during the pandemic. The resumption of outdoor activities comes at the same time as a rise in inflation which makes households more sensitive to the price of food. In July, its sales for the third quarter, ended June 4, had declined 38% to 67 million. For the fourth quarter, ended September 3, management anticipates net sales of between 50 and 51 million and an adjusted loss before interest, tax and amortization of 2 to 4 million.
Goodfood’s stock fell 17¢, or 23.4%, to 59¢ at the close of the Toronto Stock Exchange. The stock has lost nearly 95% since its peak in December 2020.