It’s the end of an era for Cresco Labs (CSE: CL), who this morning announced that they will be selling off their California operations as part of a strategic restructuring. The efforts comes as part of an effort to focus on the highest margin markets with long term growth potential.
Discussions are said to be underway with prospective buyers for the sale of Cresco’s California assets, which include operations across cultivation, manufacturing, and distribution.
Cresco has one remaining cultivation and production facility operating in the state, although it holds two cultivation licenses, a processing license, a distribution license, and a nurse license under the Sonoma’s Finest and Cub City, LLC subsidiaries. The California operations have struggled for years however, with Cresco in 2022 taking $89.5 million in goodwill impairments, followed by impairments of $9.9 million in 2023 and $2.3 million in 2024.
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“While California is the largest cannabis market in the world, the structural challenges—ranging from fragmented retail to price compression and the illicit market—combined with our lack of scaled footprint in the state, make it extremely difficult to generate sustainable profitability. Exiting California allows us to reallocate capital and resources to our core markets and build out new markets where we see clear pathways for growth and shareholder value,” commented Charlie Batchell, CEO of Cresco.
A sale of the business unit is expected to occur over the next several quarters. The FloraCal brand is not expected to be included within the sale.
Cresco Labs last traded at $0.78 on the CSE.
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