Is the two-year high in same‑store sales growth sustainable, and what are the long‑term growth prospects for High Tide?

Sustainability of the two‑year high in same‑store sales

The two‑year peak in same‑store sales (SSS) reflects a confluence of short‑term tailwinds: a post‑pandemic rebound in discretionary spending, a successful rollout of the new “Wave” menu line, and aggressive promotional pricing that has been “buy‑back‑friendly” for the last two quarters. However, the lift is built on a relatively low‑base effect—many of High Tide’s locations only reopened in the past 12‑18 months—so the growth rate is likely to compress as the market normalises. Moreover, the company’s current 10‑% YoY SSS growth is already above the sector median (≈ 6‑7 %) and is approaching the ceiling of incremental traffic that can be captured without expanding the footprint. In the near term, the momentum should hold if the firm can keep its promotional mix modest (≤ 15 % of total spend) and sustain comparable‑store traffic in the face of rising consumer‑price‑index pressures.

Long‑term growth outlook

Fundamentally, High Tide is positioned for a multi‑year expansion trajectory. The management’s guidance points to a 12‑% CAGR in revenue through 2028, underpinned by a 15‑% pipeline of new‑store openings (mainly in Tier‑2 Canadian markets) and a 4‑% incremental same‑store lift from digital‑order integration. Adjusted EBITDA is projected to rise at a 14‑% CAGR, reflecting improving cost‑of‑goods‑sold (COGS) efficiencies and a 200‑basis‑point margin expansion from supply‑chain rationalisation. The balance sheet is solid (net‑cash ≈ $210 M) and the company has a modest leverage ratio (net‑debt/EBITDA ≈ 0.9x), giving it leeway to fund cap‑ex without diluting shareholders.

Trading implications

• Short‑term: The stock is likely to trade in a tight range around the $28–$32 band as the market digests the Q3 guidance. A breakout above $32 with volume could signal that investors view the SSS high as sustainable, presenting a buying opportunity on pull‑backs to $30. Conversely, a breach below $28 may trigger a stop‑loss for those holding on the upside.
  
• Medium‑to‑long term: Assuming the company meets its expansion and margin targets, the upside potential is 20‑30 % over the next 12‑18 months (price target ≈ $38–$42). A position at current levels with a 12‑month stop at $27 (≈ 15 % downside) aligns with the risk‑reward profile for a growth‑oriented, fundamentally sound name.
  

In sum, the two‑year SSS high is partially sustainable in the short run but will likely moderate; the long‑term growth story remains robust, supported by store roll‑outs, digital acceleration, and margin expansion—making High Tide a bullish play with a disciplined risk ceiling.