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High Tide Inc., a Calgary-based company (Nasdaq HITI), (TXSV HITI), continues to grow both its store count and its balance sheet while some of its biggest competitors file for bankruptcy or close locations amid industry headwinds.

High Tide CEO Raj Grover stated on a Monday earnings call that the company has opened 21 stores this year and expects the upper end of their guidance for 20-30 locations in 2024. This optimism comes at a time when major competitors like Tokyo Smoke and Fire & Flower filed for creditor’s protection or closed many stores.

Grover told analysts, “We discovered our secret mantra for organic growth.”

High Tide reported on the expansion. Reaching 12% of the market In the provinces in which it operates, this is up from 10% one year ago.

Tokyo Smoke has recently announced plans for a new cigarette brand. Close Fire & Flower closed 29 of its approximately 100 stores after filing for protection from creditors. Fire & Flower closed over 60 stores this year as part restructuring You can also try.

“Fire & Flower, Kiaro, Trees, Tokyo Smoke — I can keep You can also go to “… ShinyBud,” said he. “There are (never-ending) companies that have gone bust.”

Grover attributed the struggles of some competitors to bad real estate decisions, unfavorable leasing terms, and “how they have managed their operating costs.”

“But again, I want to remind everyone on this call that the companies are not going out of business because they have done a great work on site selection criteria, the size of these unit and the rental rates they pay,” he said.

He said that High Tide spent only $260,000 on building out new locations, plus another $100,000 for working capital and inventory. This allows the company to “cherry-pick” prime locations, and achieve “better growth quality” than acquisitions.

He cited examples of rivals who leased oversized stores for inflated rates.

“I look at these stores with our Real Estate team, and sometimes I’m surprised to see a store that is 3,000, 4, 000, or 5,000 square feet in Canada,” he said. “Who would buy that for $100 per square foot, even in the best location?”

High Tide’s has adopted a more disciplined strategy, focusing on smaller (typically 1,500 square feet) locations with lower rents.

“We want to live in a quality location, with a square footage that is suitable for us, and at a rental rate that will last the test of time. This is essentially securing tenancy rates that are fair and reasonable, not just one-sided,” Grover said.

This strategy has allowed the company’s store count to grow to 183 while still generating positive free cash flow.

High Tide is not averse to making acquisitions, but it is very selective and deliberate when it comes to the locations of struggling competitors.

Grover said that despite the fact that Grover was involved in these portfolios, there were few opportunities because Grover didn’t want to pay $80 or $90 per square foot for a store measuring 3,000 to 4,000 square feet. “It defeats its purpose to just announce that we have taken over 10 Tokyo Smoke shops. I’m not going to take that pain over and bring it over to High Tide.”

He continued: “Many of these leases had been signed before the legalization in 2018, or even earlier in some cases. These groups are licking wounds.” It’s a bad situation to be in.”

Nevertheless, executives cited a resurgence in illicit cannabis stores which are adding pressure to legal sales in certain markets. Grover said that 200 illegal shops have opened in Canada since 2024.

“We must hold the line against the illicit market,” he said. High Tide, he noted, had to reduce its margins in Regina, Saskatchewan by 5 to 7 percent after several unlicensed shops opened nearby. The company is pushing governments for more enforcement.