Durango Colorado, Sept. 27 - Rocky Mountain Chocolate Factory, Inc. (the “Company”), which franchises gourmet chocolate and confection stores and manufactures an extensive line of premium chocolates and other confectionery products, today reported its operating results for the second quarter and first half of FY2008.
For the three months ended August 31, 2007, revenues increased 11 percent to approximately $7.5 million, compared with revenues of approximately $6.8 million for the three months ended August 31, 2006. Same-store sales at franchised retail outlets increased 1.6 percent during the most recent quarter, when compared with the year-earlier quarter. Same-store pounds of products purchased by franchisees from the Company’s factory decreased 9 percent during the most recent quarter, when compared with the prior-year quarter, primarily due to a shift in the mix of factory-made products versus products made in the stores operated by franchisees.
Net income for the three months ended August 31, 2007 increased 28 percent to approximately $1,333,000, compared with approximately $1,040,000 in the three months ended August 31, 2006. Basic and diluted earnings per share totaled $0.21 and $0.20, respectively, in the three months ended August 31, 2007, compared with $0.16 and $0.16, respectively for the three months ended August 31, 2006.
For the six months ended August 31, 2007, revenues increased 9 percent to approximately $14.8 million, compared with revenues of approximately $13.5 million for the six months ended August 31, 2006. Same-store sales at franchised retail outlets increased 0.7 percent during the six months ended August 31, 2007, while same-store pounds of products purchased from the Company’s factory by franchisees decreased 9 percent, when compared with the prior-year period.
Net income rose 20 percent to approximately $2,365,000 in the six months ended August 31, 2007, compared with approximately $1,970,000 for the six months ended August 31, 2006. Basic earnings per share increased 23 percent to a record $0.37 for the six months ended August 31, 2007, compared with $0.30 for the six months ended August 31, 2006. Diluted earnings per share increased 24 percent to a record $0.36 in the six months ended August 31, 2007, versus $0.29 for the six months ended August 31, 2006.
Total retail sales for the Company’s network of stores increased 8.2 percent to approximately $54.9 million in the six months ended August 31, 2007, compared with system-wide sales of approximately $50.8 million in the corresponding period of the previous year.
“I am pleased to report that the second quarter of Fiscal 2008 was our 16th record quarter, of the past 17 quarters in terms of earnings, when compared with prior-year periods,” noted Bryan Merryman, Chief Operating Officer of Rocky Mountain Chocolate Factory. “We reported a 28 percent increase in net income and a 28.6 percent pretax profit margin during the most recent quarter. These results were achieved despite lower franchise fees, reflecting a change in the revenue recognition policy for franchise fee revenue, and a reduction in retail sales due to a decrease in the average number of stores operated by the Company. Despite unusually hot weather in many markets again this summer, our franchisees posted a modest increase in same store sales and ended the second quarter with 316 stores in operation, a 6% increase when compared with 298 stores in operation at the end of the prior-year quarter. Our second quarter sales to specialty markets (i.e., customers outside our system of franchise retail stores), increased 219% from a year earlier, partly due to the timing of holiday shipments to a warehouse club customer.”
“A highlight of our second quarter was the signing of an Airport Franchise Development Agreement (“the Agreement”) with The Grove, Inc., a privately-owned retailer of natural snacks and other branded products. The Grove currently owns and operates food and beverage units and retail stores in 13 airports throughout the U.S., and the agreement gives The Grove the exclusive right to open Rocky Mountain Chocolate Factory stores in all airports in the U.S. where there are no Rocky Mountain Chocolate Factory stores currently operating or under development. This is an exciting development for our Company, because retail stores that are currently operated by franchisees at airports, in general, outperform the average Rocky Mountain Chocolate Factory store by a factor of more than two-to-one. We currently have nine retail airport locations in operation and plans call for at least eight additional airport stores to be operating under the agreement with The Grove within the next two years.”
“Once again, the timing of franchised store openings during Fiscal 2008 has been skewed towards the second half of the fiscal year, with only ten new stores coming on line during the six months ended August 31, 2007,” continued Merryman. “The pace of store openings should accelerate significantly during the third and fourth quarters, and we expect to reach our target of 35-40 new stores for the fiscal year ending February 29, 2008. We are also reiterating our previous guidance that earnings for the current fiscal year should rise 15 to 20 percent from the record levels reported in Fiscal 2007.”
During the second quarter of Fiscal 2008, franchisees opened new stores in Charleston, West Virginia; Farmington, New Mexico; Keystone, Colorado; Rogers, Arkansas; South Lake Tahoe (Heavenly Village), California and Tustin, California.
On May 10, 2007, Rocky Mountain Chocolate Factory, Inc. announced that its Board of Directors had approved the repurchase of up to approximately $5.0 million of the Company’s common stock in the open market, or in private transactions, whenever deemed appropriate by management. The timing of any such transactions will depend on a variety of factors, including market conditions, and the program may be suspended or discontinued at any time. To date, the Company has repurchased approximately 25,500 shares of common stock under this authorization.
On September 14, 2007, the Company paid its 17th consecutive quarterly cash dividend, in the amount of $0.095 per share, to shareholders of record as of September 4, 2007.
Rocky Mountain Chocolate Factory, Inc., headquartered in Durango, Colorado, is an international franchiser of gourmet chocolate and confection stores and a manufacturer of an extensive line of premium chocolates and other confectionery products. As of September 21, 2007, the Company and its franchisees currently operate 323 stores in 38 states, Canada and the United Arab Emirates. The Company’s common stock is listed on The Nasdaq Global Market under the symbol “RMCF”.