Canopy Growth’s (WEED.TO)(CGC) sales climbed to $124 million in the company’s fiscal third quarter of 2020, topping analyst estimates while posting a narrower loss. The company largely attributed the revenue increase to over 140 pot stores opening their doors.

The Smiths Falls, Ont.-based licenced producer’s net revenue for the three months ending Dec. 31, 2019 represents a 62 per cent increase from the $76 million reported in the previous quarter.

“Adding more stores is a pressure relief valve for some of the ills of the cannabis sector at the moment,” chief executive officer David Klein told Yahoo Finance Canada in an interview on Friday. “The biggest driver for us is being consistently on the shelf for more consumers.”

The company shrunk its EBITDA loss to $92 million, compared to $156 million in the prior period.

SMITHS FALLS, ONTARIO - MAY 15: A cart full of bagged marijuana is rolled through the corridors at the Canopy Growth Corporation headquarters in Smiths Falls, Ontario, on May 15, 2019. Canada has recently legalized recreational marijuana. (Photo by Lane Turner/The Boston Globe via Getty Images) More

Toronto-listed shares shot up nearly 20 per cent in early trading.

Analysts polled by Bloomberg expected net revenue of $105 million and an EBITDA loss of $110 million.

“Make no mistake, we have a lot of work to do,” Klein said on a conference call with analysts on Friday. “I am already taking actions to keep us in the leadership position in the cannabis industry.”

The former chief financial officer of Canopy’s largest shareholder, Corona beer-maker Constellation Brands (STZ), started leading the pot giant in January following a months-long search to replace ousted co-CEO Bruce Linton.

In his first earnings call as Canopy’s chief executive, Klein spelled out his three-pronged set of priorities for the world’s largest cannabis producer by market capitalization. They include; improving relationships with customers, bringing more focus and discipline to the business, and defining a path to profitability and positive free cash flow.

“We will do this by delivering on our commitments in a thoughtful and measured fashion,” he said. “The industry has evolved and we need to focus on specific markets where we have the legitimate right to win.”

One market he intends to win is the United States. Canopy has a deal in place to acquire New York-based Acreage Holdings (ACRG-U.CN)(ACRGF) should cannabis sales become legal under U.S. federal law. The company recently commenced online sales of its U.S.-focused CBD brand First & Free.

“We want to and need to move faster and make bolder moves in the U.S., and are focused on creating brands that resonate with our consumers,” he said.

Klein’s plan to steer Canopy towards profitability includes an ongoing “strategic review” of the company’s cultivation footprint. Analysts have raised concerns about Canopy’s inventory outstripping demand in the legal market.

“We're prepared to take initial steps to right-size our business over the next 90 days,” he said.

Open for business

The slower-than-expected roll out of physical retail locations in Canada, especially in Ontario, has been been a persistent headwind for the legal cannabis sector at large.

Klein’s predecessor, Mark Zekulin, said last November that delays in Ontario resulted in half of the expected market in that province “simply not existing.”

Canada’s most populous province overhauled is regulatory process for approving new stores late last year. The Ontario government expects store authorizations at a pace of 20-per-month beginning in April.

Canopy reported a dominant 22 per cent share of Canada’s recreational market. Recreational sales increased eight per cent quarter-over-quarter. The company attributes that strength to strong demand for both premium and value-priced dried flower and pre-rolled joints.

The company said holiday spending in the quarter added about $5 million in incremental sales.

“We were particularly encouraged to see Canopy print a solid sequential increase in its recreational sales in a period where many of its peers are anticipated to see flat to lower revenues,” Canaccord Genuity analyst Matt Bottomley wrote in a note to clients on Friday.

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