Goodfood Market, it’s getting worse

A quick update on this money-losing machine since my initial post about Goodfood.
In Q3 2022, I expected Goodfood Market (TSX: FOOD) to have a smaller loss (compared to Q2) and lower revenue.
Smaller loss because they fired some staff.
Smaller revenue, because they are losing subscribers.

Revenue was ~C$67M, compared to ~C$73M in Q2, which is lower.
The loss was ~C$21M, compared to ~C$22M, which somehow stayed almost the same.

Positive developments (not really) during the quarter that caught my attention:

  • The number of on-demand active customers grew from 27k to 38k.
    Unfortunately, the total number of active customers fell from 246k to 211k.
    Minus 35k subscribers in 3 months is hardly a positive development.
  • Sales per active customer grew from C$298 to C$318.
    Most likely, it happened because of the price increase and not because customers started to buy more.
  • Project Blue Ocean that promises positive Adjusted EBIDTA somewhere in 2023… Yeah, right.
    Well, besides cutting expenses and raising prices, what else can they do? No more 60/120-dollar coupons? This will lead to fewer customers and lower revenue.
    Will it make Goodfood business profitable? I doubt that.
    If Project Blue Ocean is not going to work for FOOD, I have a couple of other good names: Project Green Grass or Project Yellow Sand.
    If they want to be even more “original”, they can have a Project Bright Sun.

Now the fun part.
According to Goodfood’s Q3 2022 MD&A:

As at the third quarter of Fiscal 2022, the Company withdrew an additional $32.7 million of its revolving facility for a total of $41.8 million draw down as at June 4, 2022. It matures in November 2023 and it is presented as a non-current liability. A balance of $0.7 million was undrawn and nil was available as at June 4, 2022.

There will be no more issuance of shares because the price is below C$1.30 at the moment. No more issuance of Debentures, because current debentures are trading at 30 cents on the dollar.
And no more cash from the Revolving facility because they have maxed out their Revolving facility.
Thus, Goodfood started to burn its cash. It is down to ~C$99M from ~C$105 since last quarter.

I’m not sure whether FOOD will be able to achieve positive Adjusted EBIDTA (whatever it is) in 2023, but if they continue losing customers and burning cash by $C20M a quarter, they might run out of money in 2023.
All they need to do is to burn around C$50M till November 2023.
In November 2023, they need to pay a C$10.6M Term loan, and a C$42M Revolver will mature at the same time. Will banks extend it?
Add rising Interest Rates and a possible Recession in 2023 on top of that.

There is a very high probability that Goodfood will go bankrupt in 2023.
On the other hand, anyone still bullish or willing to gamble can buy their debentures (TSX:FOOD.DB.A) for 30 cents on the dollar, locking in a 19%+ yield and possible X3 capital gains. It is somewhat of a safer bet than shares.

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