Shares of Rocky Mountain Chocolate Factory, Inc. (RMCF Quick QuoteRMCF - Free Report) have lost 6.8% since the company reported its earnings for the quarter ended Aug. 31, 2025. This compares to the S&P 500 Index’s 1.5% gain over the same period. Over the past month, the stock lost 29.7% compared with the S&P 500’s 0.1% decline.

RMCF’s Financial Performance Overview

For the second quarter of fiscal 2026, total revenues rose 6.9% year over year to $6.8 million from $6.4 million in the prior-year quarter, driven primarily by stronger franchise and royalty fees as well as favorable pricing actions following the company’s exit from low-margin specialty markets. Product sales increased 5.4% to $5.2 million from $4.9 million, while franchise and royalty fees advanced 12.2% to $1.6 million from $1.5 million.

Despite higher revenue, profitability remained under pressure. Total product and retail gross loss was $33,000 against a $600,000 profit a year earlier, hurt by elevated input costs and operational inefficiencies. Net loss remained unchanged at $0.7 million, or $(0.09) per share, compared with $(0.11) in the prior-year quarter. Total expenses were nearly flat at $7.3 million.

Rocky Mountain’s Operational Discipline and Modernization Efforts

Management emphasized that RMCF has entered a new phase of its transformation, moving from planning to disciplined execution. Interim CEO Jeff Geygan highlighted new leadership in operations and franchising as instrumental in improving accountability and data-driven decision-making. A new Vice President of Operations introduced cost-saving measures aimed at reducing overtime, minimizing waste and improving product availability to franchisees.

CFO Carrie Cass noted that while total costs were flat year over year, the negative gross profit reflected short-term transitional impacts, including inventory adjustments, partially offset by factory efficiency gains. Rocky Mountain ended the quarter with $2 million in cash, up from $0.7 million at the end of fiscal 2025, after drawing $1.8 million in new borrowings to support seasonal working capital needs. Total debt stood at $7.8 million as of Aug. 31, 2025.

Rocky Mountain also reported efficiency gains in its Durango production facility and logistics improvements, including moving consumer packaging back to Durango and adding warehouse capacity in Albuquerque to reduce transit time and costs.

RMCF’s Franchise Growth and Brand Reinvigoration

Rocky Mountain is seeing renewed enthusiasm among franchisees. During the quarter, the company added two new franchise locations — at Palladio Mall in Folsom, CA, and Jersey Shore Premium Outlets in New Jersey — and acquired a company-owned store in Camarillo, CA. The Camarillo store, which generated about $700,000 in sales last year, is expected to be accretive to earnings and strengthen RMCF’s retail presence in Southern California. RMCF opened a new store in Charleston, SC — the first to feature its refreshed branding — and expects to open a flagship store in Chicago during the holiday season.

The rebranding initiative — featuring a new logo, modernized store design, refreshed packaging and a revamped website — is intended to elevate the customer experience and align store aesthetics with premium positioning. Management aims to have nearly all stores remodeled within 24 months. A new VP of Franchise Development and a seasoned R&D executive have been brought on board to accelerate store expansion and product innovation.

Rocky Mountain’s Digital Expansion and Customer Engagement

Digital transformation continues as a priority. Rocky Mountain launched a redesigned website reflecting its updated brand image and enabling smoother online-to-store integration. A new loyalty program, planned for early 2026, aims to enhance customer engagement with personalized rewards and mobile integration. Additionally, RMCF is expanding partnerships with DoorDash and other third-party delivery services to improve accessibility and unit economics. The firm’s shift toward DoorDash’s storefront model is expected to yield better profitability for franchisees and a broader reach for its products.

Factors Influencing RMCF’s Results

The quarter’s muted profitability primarily reflected higher input costs — particularly cocoa and dairy — as well as inefficiencies in manufacturing operations. However, management expects margins to improve as cocoa prices ease from recent highs and as new hedging positions take effect. In addition, cost-optimization initiatives, including warehouse relocation and freight optimization, are expected to contribute to lower transportation expenses and better factory utilization in upcoming quarters.

Rocky Mountain’s Management Commentary

Interim CEO Geygan described the company as entering a “renaissance” period, emphasizing strategic, quality-driven growth over rapid expansion. He highlighted a “culture of accountability” and underscored progress in efficiency, technology adoption and franchise engagement. The leadership team believes these initiatives position the company for a return to historical profitability levels in the coming years.

RMCF’s Other Developments

During the quarter, Rocky Mountain completed the acquisition of its Camarillo store and executed its first store remodel at the Corpus Christi, TX location, which led to a record sales day shortly after reopening. The company is also in late-stage negotiations for a new franchise location at Houston Hobby Airport, with further developments expected as part of its strategic U.S. expansion plan.