Goodfood Market and Beyond

Guys from Goodfood (TSX:FOOD) are getting creative.
They issued C$12.65 million in new debentures with a 12.5% interest rate, C$10 million of which were purchased by Investissement Québec, aka my taxes.
Debentures have a C$0.75 conversion rate (share dilution) and an interest that converts into shares (more share dilution) at a market price plus 50% premium in the first 2 years.
In my humble opinion, it looks like La Belle Province is propping up this unprofitable business by giving them $10m and charging “nothing” for 2 years.
This extra $10m will buy FOOD some more time, but 12.5% interest is crazy expensive.

At the same time, Goodfood is promising positive Adjusted EBIDTA very soon and is giving away big discounts to attract new clients:

“goodfood301” anyone? Source: CEO.CA/FOOD

Even one of the analysts was surprised:

Martin Landry
Okay. And I was wondering if you could touch on the promotional environment right now. I’ve received a voucher on the mail with a rebate of all the way up to $200, which — from Goodfood, which I thought was pretty high. Can you talk a little bit about the promotional environment right now, how it is? And how is your customer acquisition strategy going?

– Source Goodfood Market Corp. Q1 2023 Earnings Call Transcript

FOOD burned another C$8 million in the last quarter, resulting in a C$20.4 million shareholder deficit:

Surprisingly, despite the previous quarter’s record-breaking Gross Margin, Adjusted EBITDA Margin was lower than in Q4 2022:

This happened because of “suddenly” increased SG&A, which, at least partially, can be explained by increased quarter-over-quarter incentives: from 9% to 12% of net sales.
So, bigger promotions with fewer customers and lower revenue…
I guess if you adjust it well enough, your EBIDTA will become positive. 🙂

One comment on “Goodfood Market and Beyond”

  1. Goodfood‘s CEO and CFO only bought C$200k of debentures each, while John Khabbaz bought C$2m.
    John Khabbaz (through Phoenician Capital LLC) is the biggest shareholder of FOOD at the moment, holding 9,768,400 shares.
    I think the problem (for John) is that he bought these shares somewhere at the end of 2021 or beginning of 2022 and paid in the range of C$3-C$5/share.
    So he is probably throwing good money after bad in attempt to fix a poor investment decision. 

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