The fluorescent red kelp you see floating in today’s ocean of rouge (DJIA -774 points) is the plummeting share price of big-cap clothing companies.
Shares of Canada Goose (GOOS.T) Abercrombie & Fitch (ANF.NYSE), American Eagle (AEO.NYSE) and Macy’s (M.NYSE) all tanked, shedding a combined $1.6 billion in market cap.
Canada Goose warned shareholders about slowing sales growth. Abercrombie & Finch’s Hollister brand is in trouble. Teen apparel retailer American Eagle has paper-thin margins. Fierce competition in the retail sector has forced Macy’s into deep discounts. All these companies recently posted big earnings misses.
“Clothing is not a space deemed to be very healthy in terms of long-term outlooks for investors,” stated a Wells Fargo retail analyst. “You’ve got a group where the fundamentals are weakening.”
Although the cannabis space has cooled down considerably and some bullshit companies are getting flushed out, you’d need to be a real Eeyore to believe that the “fundamentals are weakening.”
In 2018, legal cannabis generated about $11 billion in worldwide sales.
“The global cannabis industry could be worth as much as USD$130 billion a decade from now if a wave of legalization sweeps the U.S., Europe and Latin America,” states the investment bank Jefferies Group LLC.
Vapen MJ (VAPN.C) is a $28 million cannabis company poised to take a growing share of that market.
“Vapen MJ’s gross revenues increased from USD$4.4 million for the quarter ended March 31, 2018 to USD$6.5 million for the quarter ended March 31, 2019, an increase quarter over quarter of US$2.1 million or 47.8%,” stated Equity Guru’s Chris Parry.
“I’ve often griped that the cannabis market is so obsessed with enthusiasts that they ignore the much larger ‘regular guy’ or even seniors demographic,” continued Parry, “but check this out:
Grandma-friendly.
- Pharmaceutical-grade dosing with every puff
- Engineered to deliver the strength and taste you want every time
- Discreet and compact – ready for any occasion
- 1,000 mg per cannister
- 100 total puffs
- 10 mg per puff
“Vapen doesn’t need to borrow money to buy things,” wrote Parry. “Working capital as at March 31, 2019 was reported at USD$16.5 million.”
On August 14, 2019 Vapen MJ announced that its subsidiary Vapen CBD has initiated a strategic partnership with CBD Emporium.
CBD Emporium offers a customer-centric retail experience, promoting health and wellness.
“Vapen’s high-quality products are a perfect fit for CBD Emporium’s customer base,” stated John Flanders, president of CBD Emporium.
CBD Emporium will carry the full line of Vapen THC-free, pharmaceutical-grade, broad-spectrum CBD products in all its stores. Products include CBD vape oil, tinctures, edibles, topicals, inhalers and dog treats.
CBD Emporium currently has nine retail stores located in Arizona. Numerous additional store locations in Arizona and California are planned, with expansion plans in Nevada, New Mexico and Texas in 2019 and 2020.
“Consumers associate the CBD Emporium with quality and service,” stated Thai Nguyen, founder and CEO of Vapen MJ Ventures. “This strategic partnership allows us to reach new CBD health and wellness customers and grow our overall market presence.”
A week ago, Vapen MJ announced a partnership with Archipelago Ventures to enter the hemp business in Hawaii.
“Archipelago Ventures is a joint effort between Legacy Ventures (LGYV.Q) and Arcadia Biosciences (RKDA.Q),” stated Equity Guru’s Joseph Morton, “Vapen MJ is grandfathered into this deal because Vapen CBD is already an equity partner of Legacy’s.”
“Our long-term growth strategy is to build value through our proprietary channels as well as through partner channels that drive revenue growth,” stated Nguyen.
The venture combines Arcadia’s genetic expertise with Legacy’s extraction and distribution and Vapen’s facilities-building and management experience.
According to a joint study conducted by BDS Analytics and Arcview Market Research, the CBD market is estimated to be worth USD$20 billion by 2024.
The inhaler canister retails for USD$80, “which isn’t bad when you consider that each puff is 10 mg with a total of 100 puffs per inhaler,” stated Morton.
Today’s hammering of the DJIA was catalyzed by a yield inversion, an infallible recession indicator which we flagged a few months back.
Of the 20 worst-performing S&P 500 stocks in 2019, seven are clothing-focused retailers.
Vapen MJ IPO’d on May 13, 2019 at $1.40 – bolted in the next seven days to $1.98 – and is now trading at $1.56.
–Lukas Kane
Full Disclosure: Vapen MJ is an Equity Guru marketing client.
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