Planet 13 Holdings (PLNHF) in a relatively short time has attracted a lot of interest from the market, not the least being it is a great branded name that is easy to remember.
When combined with its overall business model, Planet 13 works very well with its strategy to be a destination business, which is so far located, or going to be located, near popular tourist areas.
This has attracted a lot of foot traffic to its flagship store, and also attracted some brands that suggest it’s considered a place where brands can come to find a core customer.
While I don’t think it’ll be able to keep up its torrid growth in same-store customers over the long term, I do think because they’re located in highly visited tourist towns, it points to a probable ability to maintain a solid traffic over the long term, even if the novelty for some customers wears off some.
What Planet 13 Holdings operates is a dispensary a little off the Las Vegas Strip, opening for business with a sales floor of 16,200 square feet, while working on Phase II, which when completed in the latter part of 2019, it will be expended to a hefty 112,000 square feet.
The company’s purpose is to operate a number of these high-quality dispensaries in top markets around the US. Along with retail sales, the company is looking to become a distributor as well.
Included in the second phase of its expansion will be a coffee shop, event space, a pizzeria, and a production facility. With the production space it’ll have a glass windows on a 115-feet wall that customers can watch a variety of products being made.
Among the products offered at the store, and/or made are chocolates, concentrates, edibles, gummies, infused beverages, oils, topicals, and vapes. Dried cannabis is in the back of the store, making customers pass by all the high-margin products in order to get to the low-cost pot.
Some of the brands Planet 13 sells are “Leaf & Vine,” “Medizin,” and “TRENDI.” Leaf and Vine was launched in April, so the numbers haven’t come in yet as to how sales are going, but Medizin and Trendy are very popular, with TRENDI already the most popular concentrate brand in the state. As for Medizin, the company says it sells out each month.
The early numbers show the store is doing very well. The company reported customer traffic per day was an average of 1,962, with the average purchase being a robust $89.62. It has a goal of attracting 2,000 customers per day on average, so it’s already close to achieving that level. Concerning the average purchase per customer, it is a still high, but more modest $75.00 each. That’s probably more realistic as the initial interest starts to wain a little bit, and should fluctuate depending on whether or not it’s the business tourist season in Vegas.
It’s apparent to me that Planet 13 is attempting to make this a destination business, which means sales will be driven by more than local shoppers. With the event space after the completion of Phase II, there will also be entertainment value that should drive up revenue.
Destination business already attracting other brands
Being a destination business, combined with the limitations associated with the cannabis sector, makes Planet 13 a hot place for other brands to partner with.
For example, Planet 13 has signed a purchase agreement with Tyson Ranch, the cannabis business launched by Mike Tyson. The deal is an exclusive one for the Nevada market.
The company recently entered into a deal with PAX Labs, where the popular vaporizer tech brand will set up a display in the store displaying a number of its devices and other products. I expect as the company gains more exposure and popularity, there will be a lot of phone calls asking for display space in the store. This should attract and retain many more customers.
Scaling the business
There has been some concern expressed over the fact the company is comprised of only one store, even though that store should do very well. That of course is a reference to the company eventually hitting a growth ceiling, even it the store continues to perform at a very high level.
Planet 13 has started to address those concerns when it announced it is opening a second dispensary in Santa Ana, California. This one will be a smaller 40,000 square foot facility. Even more important is it supports the idea that it is definitely going to located in top markets. The new facility will be located only a short 10 miles from Disneyland.
It acquired a cannabis dispensary license and lease for a dispensary from Newtonian Principles for $6 million in cash and a little over 2 million in restricted stock shares valued at about $4 million.
This will be interesting because it represents a very different demographic it is reaching out to, as far as tourism goes. The other thing to consider is it may attract more local business than it Las Vegas store. How it does in the new store will give a clear view of whether or not it can compete in two very different markets and with two different demographics.
My view is if it can succeed in Santa Ana, it should be able to scale it out to other similar markets. If it can continue to command high prices from premium products, it could be a huge growth story in the years ahead.
The response of customers and other brands to the business model of Planet 13 is very positive. It confirms, so far, that it has tapped into significant market demand for the atmosphere of its store and the accompanying products.
Assuming it is able to maintain a high performance level after the newness eventually wears off, it looks like the company will be able to generate predictable and sustainable revenue and earnings for shareholders.
With the strategy of locating near high-traffic tourist attractions, Planet 13 seems to have a solid business model in place. One thing to consider is, the numbers can drop significantly when visitors to the area drop for a season.
Since the number I found represented from 71 to 85 percent of customers coming from other states, it gives an idea of how much sales may drop for a season of time each year.
But since it did well in Las Vegas, growing its same-store sales on a consistent basis even during the off season, it could point to it being a unique destination of its own that may not directly correlate with the peak months of Vegas tourism.
We’ll probably have to wait a year or so before seeing if the numbers hold up during slow seasons.
Either way, this is an exciting business, and I’m looking forward to seeing how it performs over the next several years. It’s probably early for most investors to take a position in, but those with some extra money on the side may want to get in at this early stage, as it looks like this is a company that has a very good chance to generate some meaningful growth in the months and years ahead.
To read more on the nitty gritty of what’s going on in the rising cannabis industry, click here.
Disclosure: No position