Rocky Mountain Chocolate Factory, Inc. Rocky Mountain Chocolate Factory, Inc. (RMCF) revealed a loss per share of 11 cents in the second quarter of fiscal 2025, which was narrower than the loss of 16 cents per share recorded in the previous year.
Detailed Revenue Breakdown
In the second quarter, Rocky Mountain Chocolate Factory reported revenues of $6.4 million, reflecting a 2.7% decline from the same period last year.
The decline in revenues from all three revenue sources contributed to the reduction in the topline performance.
Following the earnings announcement on October 15, the company’s shares saw an increase of almost 1.4% by the last trading session.
Segment Revenue Details
Revenue for Rocky Mountain Chocolate Factory stems from three main sources – Durango product and retail sales, Franchise fees, and Royalty and marketing fees.
In the quarter under review, Durango product and retail sales generated revenues of $4.9 million, marking a 1.9% decrease from the previous year. This decrease was primarily due to reduced demand from franchisees for products acquired from the Durango production facility, influenced by both a price hike to the franchise network on June 1, 2024, and a decrease in the total number of stores.
Revenue from Franchise fees amounted to $0.04 million, down 7.3% year over year.
Royalty and marketing fees brought in revenues of $1.4 million, a 5.1% decrease from the same quarter a year ago. This drop was mainly a result of a reduction in the number of stores subject to royalty fees compared to the previous year.
Rocky Mountain Chocolate Factory, Inc. Price, Consensus, and EPS Surprise
Gross Margin Improvement
During the quarter, Rocky Mountain Chocolate Factory’s gross margin increased to 11.5% from 7.7% in the corresponding quarter of the previous year. This rise was primarily driven by higher selling prices and operational efficiencies.
Operating Expenses Analysis
Sales and marketing expenses saw a 68.8% year-over-year decline to $0.1 million, partly due to operational efficiencies and cost-cutting measures, and partly influenced by the timing of expected expenses. General and administrative expenses decreased by 3.9% year over year to $1.6 million, mainly as a result of reduced legal and third-party fees.
Franchise costs rose by 55% year over year to $0.9 million, primarily due to investments in the company’s franchise development team aimed at expanding the franchised store locations and identifying new sites and franchisees. Retail operating expenses increased by 19.8% year over year to $0.2 million, largely due to the addition of the Corpus Christi location and accelerated expenses compared to the previous year.
Profitability Metrics
The loss from operations amounted to $0.9 million, narrower than the $1 million loss reported in the same quarter last year.
In the second quarter of fiscal 2025, the net loss for Rocky Mountain Chocolate Factory was $0.7 million, narrower than the $0.9 million net loss recorded in the corresponding quarter of the previous year.
Financial Health and Debt Management
At the end of the second quarter of fiscal 2025, Rocky Mountain Chocolate Factory held cash and cash equivalents amounting to $0.9 million, compared to $0.6 million at the end of the first quarter of the fiscal year.
The cumulative net cash utilized in operating activities of continuing operations in the second quarter of fiscal 2025 stood at $5.7 million, a significant rise from $0.9 million in the same period last year.
Closing Thoughts
Rocky Mountain Chocolate Factory wrapped up the second quarter of fiscal 2025 with promising bottom-line results. The notable expansion of the gross margin during the quarter also signals positive developments.
During the earnings call, management shared insights that the company’s rebranding efforts are nearing completion, with expectations to finalize the new RMCF store design soon. This is considered a significant milestone for Rocky Mountain Chocolate Factory, as it enhances the company’s ability to attract new franchise interests by showcasing mock-ups of the new store design and branding. Management aims to launch the re-brand before the year ends, emphasizing the company’s expanding pipeline of new locations and qualified operators. These updates boost optimism regarding the stock.
However, despite the positive bottom-line results, the company’s top-line performance was lackluster, with lower revenues from all revenue streams dampening the overall financial picture. The continued net loss in the quarter also remains a concern.