Shares of Rocky Mountain Chocolate Factory, Inc. (RMCF Quick QuoteRMCF - Free Report) have lost 0.4% since the company reported its earnings for the quarter ended May 31, 2025, underperforming the S&P 500 Index’s 0.5% gain in the same period. However, over the past month, the stock has delivered a robust return of 26.1%, significantly outpacing the S&P 500’s 4.8% rise.

RMCF’s Financial Performance

In the first quarter of fiscal 2026, RMCF reported total revenues of $6.37 million, virtually flat compared with $6.41 million in the same period a year ago. A closer look reveals a strategic shift in revenue mix. The product sales declined 10.6% to $4.7 million from $5.3 million, while franchise and royalty fees rose 46.7% to $1.7 million from $1.1 million year over year. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Rocky Mountain also significantly improved its profitability metrics. Gross profit from product and retail operations turned positive at $0.3 million against a loss of $0.3 million a year ago, driven by improved pricing and production efficiencies. Total costs and expenses fell 18.9% to $6.5 million from $8 million, primarily due to reduced general and administrative costs.

The bottom line showed marked progress. The net loss narrowed to $0.3 million or $(0.04) per share from a loss of $1.7 million or $(0.26) per share last year. EBITDA swung to a positive $0.2 million from a loss of $1.4 million, marking the company’s first positive EBITDA quarter in several years.

Rocky Mountain’s Operational Initiatives and Strategic Execution

Management introduced a flat monthly freight fee for franchisees to encourage frequent ordering, replacing the previous structure where charges were a deterrent to regular restocking. The change, coupled with pricing adjustments implemented in March and June, is already yielding improved gross margins. Additionally, the adoption of a new Point-of-Sale (POS) system in more than 100 stores has increased pricing transparency and enabled dynamic pricing strategies to support profitability.

The Enterprise Resource Planning and POS systems are bringing granular visibility into store-level operations. These platforms now allow RMCF to assess manufacturing efficiency, track franchisee ordering patterns, and benchmark individual store performance. With data centralization, underperforming stores are receiving tailored support through five newly deployed business consultants who provide semiannual site visits and strategic planning reviews.

RMCF’s Management Commentary

Interim CEO Jeff Geygan emphasized that Rocky Mountain has transitioned from a restructuring phase to focused execution. Geygan highlighted strong alignment across corporate teams and franchisees, increased adoption of modern systems and an elevated brand positioning. Notably, Geygan stressed that the recent margin improvements and return to positive EBITDA indicate that the transformation strategy is taking root.

CFO Carrie Cass echoed this sentiment, noting ongoing selling, general, and administrative discipline, cost containment and operational efficiency gains as key levers to drive further EBITDA expansion.

Rocky Mountain’s Outlook and Guidance

While RMCF refrained from issuing formal forward-looking financial guidance, management did express confidence in sustaining operational momentum through the remainder of fiscal 2026. The executive team cited improvements in cost structure, data analytics and franchisee performance as foundational to achieving profitability.

On the funding side, the company has $0.9 million in cash and approximately $6 million in outstanding debt. However, capital raising remains under discussion with the board, and no immediate plans are in place to issue dilutive financing.

RMCF’s Other Developments

The quarter marked the opening of a new store in Charleston, SC, the first to showcase RMCF’s updated branding and store layout. Construction is also slated to begin soon at a flagship location in downtown Chicago. Alongside these openings, several new leases are under negotiation, supported by a strategic preference for multi-unit, financially sophisticated franchise operators.

A broad brand refresh is underway, including updated packaging, store signage and a fully redesigned e-commerce platform. The new digital storefront, expected to go live this summer, aims to enhance online conversions and support premium gifting initiatives. Furthermore, a revamped loyalty program and integration with delivery platforms like DoorDash are on the horizon, positioning RMCF to capture omnichannel consumer engagement more effectively.

Rocky Mountain has not announced any acquisitions or divestitures this quarter. However, it is actively pursuing store expansion, both with existing multi-unit franchisees and new entrants who meet its stricter qualification criteria. The company aims to raise the average number of stores per franchisee — currently at 1.34 — with the goal of fostering more sophisticated operator partnerships.