Rocky Mountain Chocolate Factory (NASDAQ:RMCF) reported fiscal second-quarter revenue of $6.7 million, slightly below $6.8 million a year earlier, while gross margin improved and the company outlined efforts to address its debt, working capital needs and operating execution.
Interim Chief Executive Officer Al Harper said the company has focused on improving leadership coordination, accountability and production consistency since he assumed the role in June. He said the second quarter showed “early progress in production and gross margin,” though the business must deliver stronger results.
“Our near-term focus remains on disciplined execution,” Harper said, citing support for franchisees and stores, holiday-season execution and the development of a stronger operating foundation.
Financial Results and Balance Sheet Actions
Chief Financial Officer Carrie Cass said total revenue declined to $6.7 million in the fiscal second quarter from $6.8 million in the prior-year period. Revenue was up 9% sequentially from the first quarter, reflecting the company’s typical seasonal increase in activity.
- Product sales increased 2% to $5.3 million from $5.2 million.
- Total product and retail gross profit rose to $2.4 million from roughly breakeven a year earlier.
- Gross margin improved to 8% from negative 0.6% in the prior-year period.
- Total costs and expenses increased to $7.7 million from $7.3 million.
- Net loss widened to $1.3 million, or $0.14 per share, from $0.7 million, or $0.09 per share.
Cass said higher retail sales, helped by a larger company-owned store base and price increases, were more than offset by lower Durango product sales and lower royalty and marketing fees. The decrease in royalty and marketing fees reflected fewer franchise locations and amendments to franchise agreements.
Higher costs and expenses primarily reflected the larger company-owned store base as well as increased franchise and general administrative costs, Cass said. Those increases were partly offset by lower costs of sales and sales and marketing expenses.
The company ended the quarter with $0.4 million in cash, compared with $1.2 million at the end of fiscal 2026. Inventory totaled $2.6 million, down from $4.1 million at fiscal year-end. Debt outstanding as of Aug. 31, 2026, was $6.9 million, compared with $6.6 million at the end of fiscal 2026.
Sale-Leaseback and Strategic Review
Following the quarter, Rocky Mountain Chocolate Factory completed a sale-leaseback transaction for its Durango facility for approximately $6.6 million. Cass said the proceeds were used to repay the company’s existing $6.6 million promissory notes, which carried a 12% interest rate.
The company entered a lease effective Oct. 1, 2026, to continue using the facility. First-year rent will be $624,000, representing 9.45% of the purchase price, Cass said.
On Oct. 16, the company also entered a $2 million loan agreement with Alpine Bank. The loan matures in October 2028 and carries interest at prime plus 1%.
Harper said the board formed a strategic committee during the quarter to oversee a review of strategic and financial alternatives intended to strengthen the company’s financial position and maximize long-term shareholder value. Options under consideration include financing, a potential sale, merger or other business combination, and a going-private transaction.
Operations, Stores and Franchise Support
Chief Operating Officer David Denker, who was recently promoted to the role, said the company is organizing its operational work around three areas: products, production and innovation; supply chain and logistics; and retail experience and omnichannel growth.
Denker said demand remained strong in the second quarter, with August becoming the company’s highest production and shipping month of the calendar year. Management is monitoring equipment uptime, throughput, yield and scrap, product availability and order fulfillment, while tightening planning around production schedules, material readiness and equipment reliability.
The company is also using enhancements to its reporting platform and enterprise resource planning system to improve visibility into demand, inventory and production needs. Denker said Rocky Mountain Chocolate Factory is selectively using qualified third-party products where they complement internal capabilities and improve availability.
During the quarter, the company acquired its Chino Hills store, bringing its company-owned store count to five, compared with three a year earlier. Denker said company-operated locations serve as testing sites for merchandising, labor models, product presentation, training, technology and guest-experience initiatives before broader rollout to franchisees.
The company also completed a store-traffic pilot at its corporate locations. Combined with point-of-sale data, the initiative is intended to provide greater insight into traffic conversion, average transaction value, items per transaction, product mix, sales and profitability.
Rocky Mountain Chocolate Factory opened franchise stores in Folsom, California, and Tinton Falls, New Jersey, during the quarter, completed two remodels and continued to onboard franchisees to its integrated ordering platform and third-party delivery channels.
Holiday Priorities
Management said its immediate focus is on maintaining product flow, supporting franchisees and delivering a consistent guest experience during the holiday season. Cass said the company has invested in technology including an ERP platform, point-of-sale systems, location-specific websites integrated with third-party delivery providers and a loyalty program.
The company is also launching new box assortments and refreshed packaging for the holidays, according to Cass. Harper said management expects to provide updates as the company progresses on its operating initiatives and strategic review.
About Rocky Mountain Chocolate Factory (NASDAQ:RMCF)
Rocky Mountain Chocolate Factory, Inc is a confectionery company that manufactures and sells a variety of premium chocolate and other sweet products. Its offerings include chocolate-covered treats, caramel apples, fudge, truffles, clusters, brittles and other seasonal or specialty confections.
The company sells its products through a network of franchised and company-affiliated retail stores, as well as through wholesale and online channels. Its stores typically combine on-site candy production with retail sales, allowing customers to purchase freshly prepared products and packaged gifts.
Founded in 1981 and headquartered in Durango, Colorado, Rocky Mountain Chocolate Factory has expanded its brand beyond its original Colorado operations through franchising and distribution.
