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A customer walks through the craft beer section at a Liquor Stores N.A. Ltd.-owned Liquor Depot in Edmonton on Tuesday.Jason Franson/The Canadian Press

The oil slump has claimed another victim: alcohol sales.

October sales at Wapiti Liquor Locker Ltd., a common pit stop for oil and gas employees on the edge of Grande Prairie, Alta., were down 40 per cent from the same month last year, according to store manager Bonnie MacDougall. Sales, she said, started dropping in March and have been sliding since. Foot traffic has slowed and customers are choosing down-market booze.

"When people do come in, they are not buying the big brand-name beers that are more pricey. They are buying more of the bargain beers," she said. "We're selling more of the Lucky and the Keystone instead of the Budweiser and the Canadian."

Wapiti has cut its prices as much as possible to try to draw in customers. "It is pretty brutal," Ms. MacDougall said. "I don't even know if we've seen the bottom of the trough yet."

Alcohol sales are being squeezed along with Alberta's economy and the hard-hit energy sector, with tens of thousands of jobs cut and corporate spending sharply curtailed. Alberta also increased its taxes on liquor last month, adding a markup of 5 per cent on top of a previous 10-per-cent increase.

The trend is hurting liquor retail chains and their investors.

Liquor Stores N.A. Ltd. last week reported a 0.9-per-cent drop in year-over-year same-store sales for the third quarter. That's a sharp reversal from the 2.9-per-cent year-over-year gain in the second quarter. The company blamed slower sales in places such as Fort McMurray, where it has seven locations, and Grande Prairie, where there are nine stores. Meantime, same-store sales continued to grow in Edmonton and Calgary, where it has 81 and 44 stores, respectively.

The shift in same-store sales has investors hitting the exits, sending the stock down more than 19 per cent in the past two trading sessions. That's even though the company reported a 6.7-per-cent increase in overall sales in the quarter ended Sept. 30 to $194.2-million. The company also told investors on Friday that there could be more pressure in its Calgary and Edmonton markets, due in part to the province's recently announced increases to both personal and corporate provincial income taxes.

Analysts slashed their price targets on the stock amid concerns about the deterioration of the business and the potential for a dividend cut. Liquor Stores pays a monthly 9 cent dividend and yields just less than 10 per cent.

"The third-quarter results definitely call into question the dividend," said National Bank Financial analyst Trevor Johnson, who cut his rating to "sector perform" (similar to "hold") from "outperform" (similar to "buy") and lowered his target to $11.50 from $16.50, citing a "more challenged backdrop than previously anticipated."

"It's not a secret what's going on in Alberta, but there are implications of the same-stores sales drop and what that has on the company and the dividend," 5i Research managing partner Ryan Modesto said. "The company's value right now is largely the dividend."

The company, meantime, said it plans to continue investing in its current stores while also seeking to diversify through acquisitions outside of oil-dependent markets, in particular in the United States. Today, about 70 per cent of its 251 stores are in Alberta. It also has 22 locations in Alaska, 35 in British Columbia and 17 in Kentucky.

"We are in for the long haul," Liquor Stores chief executive officer Stephen Bebis said of the company's presence in markets such as Alberta. "You don't panic. You just stay there. It's a good time to reflect and continue to build upon your strengths."

Besides, he said, booze is, for the most part, "a recession-resistant business."

"People don't stop drinking alcohol. In fact, in tough times, you can argue that they increase consumption," Mr. Bebis said. "We aren't in the fashion business. Our products don't go out of style."

Mr. Bebis also said the company will do "whatever we can" to maintain the dividend.

"A lot of shareholders rely on that dividend to make ends meet. We want to protect that as much as possible," he said, while noting it's a board decision on whether to maintain or cut.

CIBC World Markets said the company could be challenged to pay out the dividend at current levels, while also investing in growth.

"The plan to create cash from working capital is noble, and progress has been made, but there are limits to that project," analyst Perry Caicco said in a note, while dropping his price target to $11.50 from $13.50 and maintaining his "sector performer" rating.

"Depending on how the next couple of years play out, and how long the Alberta recession continues, the board may be faced with a decision on the dividend."

Mr. Caicco said any decision to cut or reduce the dividend might be appropriate, but "would severely impact the share price in the short term, and possibly cause a rotation in the investor base."

PI Financial analyst Sheila Broughton said in a note that she doesn't expect the dividend to change and maintained her "buy" on the stock, pointing to the six successive quarter of overall sales growth. However, she did lower her target to $16, citing the slower growth in rural oil and gas rural markets.

Brenda Bouw is a freelance writer.