Rocky Mountain Chocolate Factory (NASDAQ:RMCF) reported a wider fiscal fourth-quarter loss as interim CEO Jeff Geygan said the company’s results “fell short” of expectations, primarily because of a packaged product assortment that did not match customer preferences.
Geygan said accountability for the shortfall “rests with me,” pointing to boxed offerings that leaned too heavily toward larger formats and larger candy pieces. He said packaged sales for the quarter were roughly $1.5 million below expectations, affecting store sales and having a disproportionate impact on e-commerce, which is largely made up of packaged products.
Fourth-quarter revenue declines
CFO Carrie Cass said total revenue for the fiscal fourth quarter was $6.8 million, down from $8.9 million in the same period last year. Product sales fell to $5.1 million from $7.1 million, while franchise and royalty fees declined to $1.6 million from $1.8 million.
Total product and retail gross profit was negative $0.9 million, compared with negative $0.8 million a year earlier. Cass said the decline reflected the packaged assortment underperformance, the company’s deliberate reduction of certain low- or negative-margin specialty market business, and temporary items during the quarter, partially offset by continued factory efficiency gains.
Total costs and expenses were $9.8 million, down from $11.6 million a year earlier. Cass attributed the decrease primarily to efficiencies from relocating consumer packaging operations back to the company’s Durango production facility.
Rocky Mountain Chocolate Factory reported a net loss of $3.4 million, or $0.38 per share, compared with a net loss of $2.9 million, or $0.37 per share, in the same period last year.
The company ended the fiscal year with $1.2 million in cash, up from $0.7 million at the end of fiscal 2025. Inventory was $4.1 million, compared with $4.6 million a year earlier. As of Feb. 28, 2026, total debt outstanding was $6.6 million.
Company reworks packaged assortment
Geygan said the company has conducted consumer research involving more than 1,000 participants since year-end. He said the feedback showed demand for greater assortment variety, smaller piece formats, and a mix of items such as caramels, nuts, creams, toffee, solid molded chocolates and melt-aways.
The company expects to have a full lineup of reconfigured packaged items on store shelves by Labor Day. Geygan said the offerings will include 28-, 14-, six- and four-piece assortments. The boxes will be slimmer and use paper cups instead of plastic trays, which he said should allow for greater product flexibility and faster changes.
He said the new packaging approach is expected to improve presentation, reduce production and packaging costs, lower price points and improve competitive positioning while supporting higher sales volumes.
During the question-and-answer portion of the call, Andrew Rem of Odinson Partners asked how the original assortment was determined. Geygan said the company had relied on store-level sales data indicating that large pieces and truffles were popular. However, he said the company later determined that customers were more interested in buying large truffles in-store from behind the candy case than in packaged boxes.
Specialty market exit and other pressures
Geygan said the fourth quarter was also affected by the company’s decision to exit a specialty market customer relationship tied to a negative-margin offering. He said that decision reduced revenue by nearly $1.5 million. In response to a question, he said the vast majority of sales from that customer occurred in the fourth quarter because the business was seasonal.
Other fourth-quarter headwinds included temporary disruptions tied to the company’s e-commerce transition, costs related to disposing of outdated packaging supplies, and elevated professional service fees.
Despite the quarter’s results, Geygan said the company’s broader transformation remains “intact and on track.” He said price adjustments, product mix changes, SKU rationalization, production process reviews and other operational changes have improved the company’s underlying economics.
Geygan said that based on margin analysis of products sold in the fourth quarter and continuing through the recently completed first quarter, the company achieved its highest gross margin mix in more than two years. He said gross margin is now close to the company’s long-term target, allowing management to shift more focus toward revenue growth.
The company is also working to improve e-commerce shipping economics. Geygan said shipping costs on certain box products historically were too high relative to order value, but the company has negotiated corporate shipping rates that are expected to improve its e-commerce cost structure.
Store remodels and franchise development
Geygan highlighted performance trends at newly designed and remodeled stores. He said the Chicago State Street store is running at approximately $1.1 million in annualized sales, while the Charleston, South Carolina, location is operating at an approximate $600,000 annualized run rate. The company expects Charleston to reach its run-rate revenue within its first three years as local brand awareness builds.
The company-owned store in Corpus Christi, Texas, was remodeled and has generated an approximate 10% to 15% sales increase since reopening, Geygan said. He also cited encouraging trends at the Concord Mills, North Carolina, store after its remodel.
Rocky Mountain Chocolate Factory recently acquired the franchise store in Nashville, Tennessee. Geygan said company store acquisitions are typically accretive to earnings and provide a controlled environment to test merchandising, guest engagement, new products and operating initiatives.
The company currently has four company-owned locations, representing 3% of its domestic store count. Geygan said it is reasonable to expect company stores to represent 5% to 10% of the store base in future years.
On franchise growth, Geygan said the company recently added a new six-store Area Development Agreement, bringing committed future development to 40 locations over the next three to five years. The new agreement is the company’s first vertical market development deal and includes Rocky Mountain winter and summer resort locations.
In response to Peter Sidoti of Sidoti & Company, Geygan said the company is already actively marketing new franchises. He said 31 of the 40 committed future locations are with existing franchisees, while nine are with a new operator. He added that Rocky Mountain Chocolate Factory is focused on finding qualified multi-unit operators, rather than single-store franchisees.
Digital initiatives and guest engagement
Geygan said the company continues to expand its upgraded point-of-sale platform, which provides data on average basket size, transaction counts and items per transaction. He said the information helps both corporate teams and franchisees make decisions about merchandising, assortment and store performance.
Third-party delivery is also showing encouraging data, according to Geygan. He said average basket size through those platforms is roughly twice the value of in-store transactions, and about half of those transactions are fulfilled through in-store pickup rather than delivery. He said the company views third-party delivery as a guest acquisition and incremental order channel, not just a delivery tool.
The company also has a white-label online ordering option without commission expense, available through newly developed store websites curated to local markets and operators.
Geygan said Rocky Mountain Chocolate Factory expects to launch a new loyalty and mobile app platform in late summer. The company is also planning a collaboration with “Miraculous,” an animated children’s series, centered on a limited-time caramel apple promotion and in-store merchandising from Sept. 15 through Oct. 31.
Geygan said the company’s priorities entering the new fiscal year are to execute more precisely in packaged products and e-commerce, build on margin improvements, and turn progress in retail performance, franchise development, digital engagement and cost discipline into consistent positive financial results.
Asked when the company expects to become positive cash-flow generating, Geygan said Rocky Mountain Chocolate Factory has not disclosed a target, but added that achieving that goal is a priority “as soon as possible.”
About Rocky Mountain Chocolate Factory (NASDAQ:RMCF)
Rocky Mountain Chocolate Factory, Inc is a specialty chocolate confectionery franchisor and manufacturer headquartered in Durango, Colorado. Established in 1981, the company develops, produces and markets a range of premium chocolate products, including truffles, caramels, toffees, fudge, nuts, dipped fruits and caramel apples. It operates company-owned retail stores as well as a franchised network, supplying handcrafted confections and related gift items through more than 300 retail locations across North America and select international markets.
From its origins as a single store in downtown Durango, Rocky Mountain Chocolate Factory introduced its first franchised outlets in the mid-1980s and completed a public offering in 1985.
