Rocky Mountain Chocolate Factory, Inc. Q2 FY2025 earnings call

• New store openings: Targeting new stores in strategic markets, with first opening in Edmond, OK next month; finalizing leases/franchise agreements for 3 more; growing pipeline of sites/operators.
• Rebrand: Near completion (90%+), expecting to finalize new store design soon, targeting launch by end of year.
• Inventory management: Managing inventory to meet holiday demand for franchisees; improving order fulfillment rates.
• Franchisee Product Innovation Group: Composed of product dev team and creative franchisees, sharing new product ideas.
• Personnel: Increased hourly wages at factory to attract/retain talent; welcomed new CFO Carrie Cass in Aug.
• Liquidity: Announced $6 million 3-year credit facility to retire previous $4 million, use for equipment, inventory, growth.
• ERP system: Gearing up to deploy new ERP in early 2025 to improve business integration/data reporting.
• Customer loyalty program: Active in 21 stores, working on rollout across network.
• E-commerce: Set up independent e-commerce team, aiming to drive traffic to brick-and-mortar.

Total revenue for fiscal Q2 2025 was $6.4 million, down from $6.6 million in the same period last year. Product sales were $4.9 million (down from $5 million last year), and franchise and royalty fees were essentially flat at $1.5 million. Retail gross profit was $0.6 million (up from $0.4 million last year) with a gross margin of 11.5%. Cash balance ended at $1 million (down from $2.1 million at Feb 29, 2024). Inventories were $6.1 million (up from $4.4 million at Feb 29, 2024). Line of credit outstanding was $3.5 million (up from $1.3 million at Feb 29, 2024).

• New store openings: Expecting new stores but not significant revenue impact in fiscal 2025; revenue growth from existing stores increasing sales and e-commerce.
• ERP system: To boost operational efficiencies and streamline processes.
• Loyalty program: Working on rollout across network.
• E-commerce: Expected to be an important revenue contributor in future.

• Operational efficiency improvement from wage increase is early to measure.
• Logistics challenges in getting product to stores timely.
• Dependence on franchisees and their performance.
• Market dynamics affecting e-commerce and store sales.

Q: Measurable improvement in operational efficiency since increasing factory wages?

A: Yes, retention is dramatically higher than historically, but early to tell; well-trained employees on time are essential to production goals.

Q: How do you expect new brand and store design to affect customer engagement and franchisee interest?

A: Don't want to reveal yet, but team is excited about the rebranding, which will be rolled out shortly.

Q: How do you prioritize new store markets and impact on revenue in fiscal 2025?

A: Revenue growth from existing stores increasing sales and e-commerce; prioritize areas with dense population like east of Mississippi, but fiscal 2025 new stores won't have significant revenue impact.