Rocky Mountain Liquor Navigates Challenges in 2024, but Clouds Remain on the Horizon

Rocky Mountain Liquor Inc. (RUM) closed its 2024 fiscal year with a mix of operational progress and financial headwinds, underscoring the tough retail environment in Alberta. While the company achieved milestones like a full rollout of its modernized point-of-sale (POS) system, its bottom line took a hit, with a net loss of $2.1 million compared to a profit of $463,000 in 2023. The results highlight both strategic investments and the challenges of competing in a saturated market.

Sales Decline Reflects External and Internal Pressures

Total sales for 2024 fell to $39.7 million, a 4.9% drop from 2023. Management cited several factors: the closure of one store in Q2, road construction that reduced foot traffic at a key location, and increased competition from discount retailers and online platforms. The latter has become a growing threat in the liquor sector, as consumers increasingly turn to convenience and price-sensitive options.

The Impairment Charge: A One-Time Hit or a Sign of Wider Concerns?

The most striking financial figure was the $1.96 million impairment charge on goodwill in Q4 2024, which single-handedly turned RUM’s net income from positive to negative. While impairments are often non-cash charges tied to revised business outlooks, this move suggests management now views its long-term prospects more cautiously. The decision raises questions about whether RUM’s retail locations are overvalued in a shifting market or if the company is proactively addressing declining store performance.

Costs Rise, but Gross Margins Hold Steady

Despite the sales decline, gross margins remained stable at 23%, a testament to effective cost management. RUM achieved this through strategic purchasing and reduced lease costs, offsetting inflationary pressures. However, operating and administrative expenses surged, driven by annual salary increases, one-time costs for the POS system rollout, and higher professional fees tied to shareholder matters. This expense growth highlights the trade-off between long-term investments (like technology upgrades) and short-term profitability.

Adjusted EBITDA Signals Operational Strains

Adjusted EBITDA dropped 72.5% to $310,000 in 2024, down from $1.09 million in 2023. While the impairment charge and non-recurring expenses explain much of the decline, the figure underscores the pressure on RUM’s core operations. Even with margin improvements, rising fixed costs and a shrinking sales base are squeezing profitability.

Strategic Moves and Uncertainties Ahead

Post-2024, RUM closed one store and sold another, signaling a shift toward a leaner retail footprint. This could improve efficiency but risks losing customer bases in key areas. The POS system rollout, completed by August 2024, aims to boost operational efficiency and customer experience—a positive step that may pay dividends in 2025. Management emphasized a focus on competitive pricing and cost discipline moving forward, though they noted risks like market volatility and lingering non-recurring expenses.

Conclusion: A Fragile Recovery Requires Patience

Rocky Mountain Liquor’s 2024 results are a cautionary tale of retail resilience in a challenging environment. While the company made progress on technology and cost controls, the net loss and EBITDA decline suggest underlying vulnerabilities. The $1.96 million impairment charge was a one-time hit, but it reflects a reality: RUM’s physical stores face mounting competition from both online sellers and discounters.

Investors should focus on two critical questions: Can RUM reverse its sales decline through pricing and store optimization? And will operational improvements from the POS system translate into sustained margin gains? If 2025 sales rebound even modestly—say, to $40 million—and non-recurring costs subside, RUM could return to profitability. However, with Alberta’s liquor market expected to remain competitive and volatile, the path to recovery is narrow.

For now, the data paints a company clinging to stability. A would likely show volatility tied to these results, but long-term investors must weigh RUM’s strategic bets against its ability to adapt in a fast-changing retail landscape. The verdict? Proceed with caution, but keep an eye on execution in 2025.