Rocky Mountain Chocolate Factory, Inc. RMCF recently reported a loss per share of 11 cents in the second quarter of fiscal 2025, which is an improvement from the loss of 16 cents per share in the same quarter last year.
RMCF’s Revenues in Detail
In the fiscal second quarter, Rocky Mountain Chocolate Factory recorded revenues of $6.4 million, marking a 2.7% decline compared to the previous year.
Deteriorating revenues from all three sources contributed to the decline in the topline.
Following the earnings announcement on Oct. 15, the company’s shares saw an increase of nearly 1.4% in the subsequent trading sessions.
Rocky Mountain’s Segment Details
Rocky Mountain’s revenue streams comprise Durango product and retail sales, Franchise fees, and Royalty and marketing fees.
For the quarter under review, Durango product and retail sales generated revenues of $4.9 million, down 1.9% from the previous year. This decline was primarily attributed to reduced demand from franchisees, partly impacted by a price increase and lower store count.
Franchise fees brought in $0.04 million, marking a 7.3% year-over-year decrease.
Royalty and marketing fees reported revenues of $1.4 million, down 5.1% from the same quarter last year, mainly due to a decrease in the number of stores subject to royalty fees.
Rocky Mountain Chocolate Factory, Inc. Price, Consensus and EPS Surprise
Rocky Mountain Chocolate Factory, Inc. price-consensus-eps-surprise-chart | Rocky Mountain Chocolate Factory, Inc. Quote
RMCF’s Gross Margin
During the quarter, Rocky Mountain’s gross margin expanded to 11.5% from 7.7% in the same quarter last year. This growth was primarily driven by higher selling prices and operational efficiencies.
Rocky Mountain’s Operating Expenses Analysis
Sales and marketing expenses saw a 68.8% year-over-year reduction to $0.1 million due to operational efficiencies and cost-cutting measures. General and administrative expenses also decreased by 3.9% to $1.6 million mainly because of lower legal and third-party fees.
However, franchise costs surged by 55% to $0.9 million, primarily due to investments in franchise development. Retail operating expenses rose by 19.8% to $0.2 million, driven by the addition of a new location.
Rocky Mountain’s Profitability
The company’s loss from operations narrowed to $0.9 million from $1 million in the same quarter last year. The net loss in the second quarter was also reduced to $0.7 million from $0.9 million.
RMCF’s Liquidity & Debt Management
By the end of the second quarter of fiscal 2025, Rocky Mountain had cash and cash equivalents of $0.9 million, up from $0.6 million at the end of the first quarter. The cumulative net cash used in operating activities from continuing operations reached $5.7 million, compared to $0.9 million a year ago.
Our Take
Rocky Mountain closed the second quarter of fiscal 2025 with promising bottom-line results. The expansion of the gross margin during the period is a positive signal for the company’s future prospects.
Management’s confirmation regarding the nearing completion of the company’s rebranding process and the anticipated launch of the new store design enhance the company’s outlook. The growing pipeline of potential sites and operators further adds to the optimism surrounding the stock.
However, the disappointing top-line results and continued net losses pose challenges for Rocky Mountain. The company’s resilience in the face of these obstacles will be crucial for its future performance.