Rocky Mountain Stock Slips Post Q3 Earnings Despite Margin Improvement

Shares of Rocky Mountain Chocolate Factory, Inc. RMCF have lost 2% since the company reported earnings for the quarter ended Nov. 30, 2025, compared with a 0.4% loss for the S&P 500 Index over the same period. Performance over the past month has been notably stronger, however, with shares gaining 24.1%, well ahead of the S&P 500’s 3.9% rise during that time.

RMCF’s Financial Performance Overview

For the third quarter of fiscal 2026, Rocky Mountain reported total revenues of $7.5 million, down from $7.9 million in the year-ago quarter, reflecting a 4.4% year-over-year decline. Management attributed the decrease primarily to the company’s intentional exit from lower-margin specialty and wholesale channels as part of its margin-first strategy.

Despite the top-line pressure, profitability metrics showed marked improvement. Net loss narrowed to $0.2 million, or $0.02 per share, from a loss of $0.8 million, or $0.11 per share, in the prior-year quarter. Total product and retail gross profit increased to $1.4 million in the third quarter of fiscal 2026 from $0.7 million in the year-ago quarter, driven by pricing actions, improved product mix and labor efficiencies. EBITDA swung to a positive $0.4 million from a loss of $0.4 million in the comparable period last year, highlighting the impact of cost reductions and improved operating leverage.

Rocky Mountain’s Other Key Business Metrics

Gross manufacturing margin improved significantly during the quarter, reaching 21.4% compared with 10% in the same quarter last year and negative 0.6% in the immediately preceding quarter. Total costs and expenses declined 13.2% to $7.5 million from $8.6 million a year ago, with savings realized across most operating categories, including general and administrative expenses and cost of sales. While higher raw material and freight costs continued to weigh on results, these pressures were partially offset by SKU rationalization, reduced overtime and better production scheduling. RMCF also added a second production shift at its chocolate factory, which management believes can unlock additional annual cost savings of $500,000 to $1 million.

On the balance sheet, cash and cash equivalents stood at $0.6 million at the quarter’s end compared with $0.7 million as of Feb. 28, 2025, while inventories declined during the same period, consistent with SKU rationalization and production streamlining efforts.

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 Management Commentary

Management emphasized that the quarter marked an inflection point in its ongoing transformation. Leadership reiterated its focus on prioritizing profitability and long-term value creation over near-term revenue growth. Executives highlighted progress across several initiatives, including disciplined pricing adjustments, simplification of the SKU portfolio and investments in operational and technology capabilities. Management also pointed to encouraging momentum in franchise development, supported by renewed brand positioning and targeted digital marketing efforts, as a key driver of future growth.

Factors Influencing Rocky Mountain’s Headline Numbers

The decline in revenue was largely the result of deliberate actions to exit lower- or negative-margin revenue streams, which management views as necessary to reset Rocky Mountain’s economic foundation.

On the cost side, short-term inefficiencies related to production transitions and elevated input costs continued to affect results, though these were offset by improved labor efficiency and product mix. Cocoa price volatility also played a role during the quarter, but management noted that recent declines in cocoa prices and the elimination of an approximately 10% tariff on cocoa should provide a margin tailwind in the coming periods. RMCF has locked in nearly 20% of its expected annual chocolate consumption at more favorable recent prices.

RMCF’s Guidance and Outlook

Rocky Mountain did not issue formal quantitative guidance but outlined expectations for continued margin improvement and a gradual return to profitability. Management indicated that meaningful revenue contributions from new franchise locations are likely to take time, given typical store build-out and maturation periods. Near-term growth is expected to come primarily from improving same-store sales, expanding e-commerce capabilities and selectively growing higher-margin channels, rather than rapid unit expansion.

Rocky Mountain’s Other Developments

Subsequent to the end of the quarter, Rocky Mountain completed a $2.7 million equity capital raise. The proceeds were used to pay down $1.2 million of debt, with the remaining $1.5 million retained as additional working capital. During the quarter, the company also executed an area development agreement with four franchisees that will bring 34 new stores to market over a four- to five-year period. Management described this agreement as a milestone that reflects growing interest from well-capitalized, multi-unit operators and supports RMCF’s long-term strategy of disciplined, franchise-led growth.

Rocky Mountain also continued rolling out technology initiatives, including expanded point-of-sale adoption across more than 120 stores, DoorDash storefront integration and the development of a loyalty program expected to launch in the first half of the calendar year. No acquisitions or divestitures were announced during the quarter, but management continued to rationalize underperforming stores and simplify the operating footprint as part of its broader restructuring efforts.

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