Core Viewpoint - Rocky Mountain Chocolate Factory, Inc. (RMCF) has experienced a significant decline in stock price following its fiscal third-quarter results, raising investor concerns about its financial performance and future prospects [1] Financial Performance - In the third quarter of fiscal 2025, RMCF reported total revenues of $7.9 million, a 2.5% increase from $7.7 million in the prior-year period [2] - Durango product sales increased by 4.9% to $6.4 million, while Royalty and marketing fees decreased by 11.5% to $1.1 million [2] - Total product and retail gross profit remained flat at $0.7 million, with gross margins slightly compressed from 10.2% to 10% due to higher supply and labor costs [3] - The company posted a net loss of $0.8 million, or $(0.11) per share, consistent with the previous year's net loss [3] - Adjusted EBITDA improved to $41,000 from a loss of $0.3 million in the prior year, indicating progress in operational efficiency [3] Cost Management - RMCF's total costs and expenses increased by 1.4% to $8.6 million, influenced by non-recurring professional expenses [5] - The company maintained stable gross profit despite margin pressures, reflecting effective cost management initiatives [5] Cash Flow and Inventory - RMCF ended the quarter with a cash balance of $1.1 million, down from $2.1 million, due to investments in operational improvements and inventory buildup [6] - Accounts receivable rose to $4.1 million from $2.2 million, and inventory increased to $5.7 million from $4.4 million, aligning with the strategy to support franchisee needs [6] Management Initiatives - Interim CEO Jeff Geygan highlighted the implementation of a new ERP system aimed at improving inventory management, production scheduling, and financial reporting [7] - The company is also focusing on rebranding efforts, including new store designs and updated packaging to enhance customer engagement [7] Market Factors - RMCF attributed margin pressures to increased supply and labor costs, alongside investments in strategic initiatives [8] - E-commerce sales nearly tripled year over year during the holiday season, driven by targeted marketing campaigns [8] Future Outlook - Management indicated that ongoing efforts to streamline operations and improve franchisee support would position the company for long-term growth, although near-term cost pressures remain [9] - RMCF secured a three-year $6 million credit facility to support investments in equipment and growth initiatives [10] - The company plans to open two new stores and a kiosk in Chicago, Charleston, and Brandon, demonstrating its commitment to expanding its franchise footprint [10]
RMCF Stock Falls Despite Q3 Earnings Improvement, Margin Declines