Decline in Earnings and Revenues
Rocky Mountain Chocolate Factory, Inc. (RMCF) reported a loss of 26 cents per share in the first quarter of fiscal 2025, wider than the loss of 13 cents per share in the same quarter the previous year.
Revenue Overview
In the first quarter of fiscal 2025, Rocky Mountain posted revenues of $6.4 million, reflecting a 0.5% decline from the previous year.
The decrease in revenues was primarily attributed to lower royalty and marketing fees during the period.
Revenue Sources Breakdown
Rocky Mountain derives revenues from three main sources: Durango product and retail sales, Franchise fees, and Royalty and marketing fees.
Durango product and retail sales revenue came in at $5.3 million, marking a 5.2% increase from the previous year due to higher franchisee demand and better inventory management.
Franchise fees brought in $0.1 million, up 55.6% year over year, primarily from store ownership transfer fees.
Royalty and marketing fees contributed $1.1 million in revenues, down 23.1% from the previous year, mainly due to fewer stores subject to royalty fees.
Price, Consensus, and EPS Trends
Rocky Mountain Chocolate Factory, Inc. price-consensus-eps-surprise-chart | Rocky Mountain Chocolate Factory, Inc. Quote
Gross Margin and Expenses Analysis
The company’s gross margin decreased to (5.8)% in the latest quarter from 5.1% in the previous year, primarily due to higher raw material and labor costs.
Sales and marketing expenses dropped by 9.1% year over year to $0.4 million, thanks to operational efficiencies and cost-saving initiatives.
General and administrative expenses declined by 35.9% to $1.2 million, driven by reduced legal fees related to contested solicitation of proxies.
Profitability and Financial Position
Rocky Mountain incurred an operating loss of $1.6 million, wider than the $1.5 million loss in the previous year.
The net loss for the quarter was $1.7 million, higher than the $0.8 million loss in the comparable quarter.
Liquidity and Cash Management
At the end of the first quarter of fiscal 2025, the company had cash and cash equivalents of $0.6 million, down from $2.1 million at the end of fiscal 2024.
Net cash used in operating activities for continuing operations in the latest quarter was $2.2 million, compared to $0.4 million in the prior year.
Conclusion
Rocky Mountain faced challenges in the first quarter of fiscal 2025 with declines in both top-line and bottom-line figures. The contraction in gross margin and increased net loss paint a bleak picture. However, the positive traction in revenues from Durango product and retail sales and Franchise fees are bright spots amid the adversity.
