Canopy Growth Corp. took a surprise $32.7 million hit from returns and pricing changes related primarily to the sales of its oil and soft gel capsule products, resulting in the company’s net revenue plummeting by 15 per cent, quarter-over-quarter, for the period ending Sept. 30, 2019.

This is the biggest revenue decline the company has seen since legalization over a year ago.

Canopy reported a net revenue of $76.6 million, compared to $90.5 million in the previous quarter. The company’s net loss was $374 million.

The Smiths Falls, Ont.-based licensed producer also took a $15.9 million write-down on inventory, attributing the charge to “excess recreational cannabis inventory resulting from current and forecasted sell-in rates of oil and softgel products.”

Gross margins were impacted by $40.4 million due to the write-downs and returns, with Canopy reporting a negative gross margin of 13 per cent.

“The last two quarters have been challenging for the Canadian cannabis sector as provinces have reduced purchases to lower inventory levels, retail store openings have fallen short of expectations, and cannabis 2.0 products are yet to come to market,” said Mark Zekulin, Canopy Growth’s CEO in a statement.

“However we believe these conditions are a short-term headwind in what is a brand-new industry,” he added.

While Canopy’s international medical sales increased by 72 per cent from the previous quarter, its domestic sales — both medical and recreational — declined by seven per cent, driven reduced sales to other licensed producers.

Although the company reportedly increased its share of the market in Alberta, where there are over 300 private retail stores, its adult-use revenue declined by almost 10 per cent from the previous quarter.

The company will be holding a conference call with analysts at 8:30am E.T.

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