Fiscal second quarter 2027
Filed Oct 19, 2026Rocky Mountain Chocolate Factory Reports Fiscal Second Quarter 2027 Financial Results
Revenue declined to $6.7 million, the net loss widened to $1.3 million from $0.7 million, and EBITDA loss widened to $0.7 million from $0.1 million. Gross margin recovered to 8.0% from (0.6)%, while the Company completed post-quarter financing transactions and is exploring strategic alternatives.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenue, three months ended August 31, 2026GAAP | $6.65M | – | – |
| Sales, three months ended August 31, 2026GAAP | $5.31M | – | – |
| Franchise and royalty fees, three months ended August 31, 2026GAAP | $1.34M | – | – |
| Total gross margin, three months ended August 31, 2026GAAP | $423K | – | – |
| Gross margin, three months ended August 31, 2026GAAP | 8.0% | – | – |
| Total Adjusted Gross Margin, three months ended August 31, 2026non-GAAP | $655K | – | – |
| Total Adjusted Gross Margin percentage, three months ended August 31, 2026non-GAAP | 12.3 % | – | – |
| Cost of sales, three months ended August 31, 2026GAAP | $4.89M | – | – |
| Franchise costs, three months ended August 31, 2026GAAP | $784K | – | – |
| Sales and marketing expense, three months ended August 31, 2026GAAP | $162K | – | – |
| General and administrative expense, three months ended August 31, 2026GAAP | $1.33M | – | – |
| Retail operating expense, three months ended August 31, 2026GAAP | $435K | – | – |
| Depreciation and amortization, exclusive of depreciation and amortization expense included in cost of sales, three months ended August 31, 2026GAAP | $141K | – | – |
| Total costs and expenses, three months ended August 31, 2026GAAP | $7.74M | – | – |
| Loss from operations, three months ended August 31, 2026GAAP | −$1.08M | – | – |
| Interest expense, three months ended August 31, 2026GAAP | −$211K | – | – |
| Interest income, three months ended August 31, 2026GAAP | $15K | – | – |
| Other (expense) income, net, three months ended August 31, 2026GAAP | −$196K | – | – |
| Loss before income taxes, three months ended August 31, 2026GAAP | −$1.28M | – | – |
| Income tax provision (benefit), three months ended August 31, 2026GAAP | - (In thousands) | – | – |
| Net loss, three months ended August 31, 2026GAAP | −$1.28M | – | – |
| Basic loss per common share, three months ended August 31, 2026GAAP | $ (0.14) | – | – |
| Diluted loss per common share, three months ended August 31, 2026GAAP | $ (0.14) | – | – |
| Weighted average common shares outstanding - basic, three months ended August 31, 2026GAAP | 9,447,259 | – | – |
| Weighted average common shares outstanding - diluted, three months ended August 31, 2026GAAP | 9,447,259 | – | – |
| EBITDA loss, three months ended August 31, 2026non-GAAP | −$712K | – | – |
| Total revenue, six months ended August 31, 2026GAAP | $12.77M | – | – |
| Sales, six months ended August 31, 2026GAAP | $10.19M | – | – |
| Franchise and royalty fees, six months ended August 31, 2026GAAP | $2.57M | – | – |
| Total gross margin, six months ended August 31, 2026GAAP | $602K | – | – |
| Total Adjusted Gross Margin, six months ended August 31, 2026non-GAAP | $1.06M | – | – |
| Total Adjusted Gross Margin percentage, six months ended August 31, 2026non-GAAP | 20.0 % | – | – |
| Loss from operations, six months ended August 31, 2026GAAP | −$2.09M | – | – |
| Net loss, six months ended August 31, 2026GAAP | −$2.45M | – | – |
| Basic loss per common share, six months ended August 31, 2026GAAP | $ (0.26) | – | – |
| Diluted loss per common share, six months ended August 31, 2026GAAP | $ (0.26) | – | – |
| EBITDA, six months ended August 31, 2026non-GAAP | −$1.35M | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| SalesRetail sales increased, driven by the larger company-owned store base and price increases. | $5.31M | – | – |
| Franchise and royalty feesTotal revenue was primarily affected by lower royalty and marketing fees. | $1.34M | – | – |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
What drove it
- Total revenue was $6.7 million for the second quarter of fiscal 2027 compared to $6.8 million in the second quarter of fiscal 2026, primarily due to lower Durango product sales and royalty and marketing fees which offset the increase in retail sales.
- Gross margin improved to 8.0% from (0.6)%, reflecting pricing actions and production efficiencies.
- August was the highest production and shipping month of the calendar year.
- The acquisition of Chino Hills in July 2026 expanded the company-owned store base to five locations, while new franchised stores opened in Folsom, California, and Tinton Falls, New Jersey.
Concerns
- Net loss was $1.3 million or $(0.14) per share, compared to a net loss of $0.7 million or $(0.09) per share.
- EBITDA loss was $0.7 million compared to a loss of $0.1 million.
- Total costs and expenses were $7.7 million, up from $7.3 million, reflecting the larger company-owned store base and higher franchise and general and administrative costs.
- The Board formed a strategic committee to explore strategic alternatives, including a possible sale, merger, other business combination, or going-private transaction. The Company stated there can be no assurance the review will result in a transaction or other strategic change.
What to watch
- Production volume from the Durango facility as the Company prepares for the holiday season.
- Whether reporting-platform and ERP enhancements improve visibility into demand, inventory and production requirements.
- Execution across the five company-owned locations and support for franchisees following the July 2026 Chino Hills acquisition and the new franchised store openings.
- The use of the $2.0 million Alpine Bank working-capital advance and the effects of the Durango facility sale-leaseback.
- Developments in the strategic alternatives review.
Balance sheet and cash flow
- Cash and cash equivalents were $ 416 (In thousands) as of August 31, 2026, compared to $ 1,218 (In thousands) as of February 28, 2026.
- Notes payable were $ 6,780 (In thousands) current and $ 114 (In thousands) less current portion as of August 31, 2026, compared to - current and $ 6,568 (In thousands) less current portion as of February 28, 2026.
- Total assets were $ 18,794 (In thousands) and total liabilities were $ 15,768 (In thousands) as of August 31, 2026.
- Subsequent to quarter end, the Company completed a $6.6 million sale-leaseback transaction for its Durango, Colorado manufacturing facility. Net proceeds were used to repay $6.6 million in debt bearing interest at 12% per annum.
- The Company incurred prepayment penalties and related costs of $0.3 million in connection with the debt repayment.
- On October 16, 2026, the Company received an advance of $2.0 million from Alpine Bank for working capital purposes. The loan matures on October 16, 2028, and bears interest at the prime rate plus 1%.
Analysis
Fiscal second-quarter revenue was $6.7 million, compared with $6.8 million in the fiscal second quarter of 2026. Sales were $5.3 million versus $5.2 million, while franchise and royalty fees were $1.3 million versus $1.6 million. Management attributed the revenue decline primarily to lower Durango product sales and royalty and marketing fees, which offset higher retail sales from the larger company-owned store base and price increases.
Gross profit recovered to $0.4 million from a gross loss of less than $0.1 million, and gross margin improved to 8.0% from (0.6)%. The Company attributed the improvement to pricing actions and production efficiencies. Adjusted Gross Margin was $655 thousand, or 12.3%, compared with $205 thousand, or 4.0%. Management stated that August was its highest production and shipping month of the calendar year and identified higher Durango production volume as a key holiday-season priority.
The gross-margin recovery did not offset higher expenses. Total costs and expenses were $7.7 million versus $7.3 million, with higher retail operating, franchise, and general and administrative costs. Loss from operations was $1.1 million compared with $0.5 million. Net loss widened to $1.3 million, or $(0.14) per share, from $0.7 million, or $(0.09) per share, and EBITDA loss widened to $0.7 million from $0.1 million. For the six months ended August 31, 2026, net loss was $2.4 million and EBITDA loss was $1.4 million, compared with net loss of $1.0 million and EBITDA of $67 thousand in the prior-year period.
Liquidity and capital structure changed after quarter end. Cash and cash equivalents were $416 thousand at August 31, 2026. The Company subsequently completed a $6.6 million sale-leaseback of its Durango manufacturing facility, used net proceeds to repay $6.6 million of 12% debt, and incurred $0.3 million of prepayment penalties and related costs. It also received a $2.0 million working-capital advance from Alpine Bank. Separately, the Board's strategic committee is reviewing alternatives after receiving expressions of interest from third parties. The release did not provide financial guidance.
Management, verbatim
Since stepping into the Interim CEO role, I have been encouraged by the way our leadership team has come together around a shared set of priorities for the business.
Allen Harper, Interim CEO
During the second quarter, we made progress improving production and execution across the business. August was our highest production and shipping month of the calendar year.
David Denker, Chief Operating Officer
The acquisition of Chino Hills in July 2026 expanded our company-owned store base to five locations, while new franchised stores opened in Folsom, California, and Tinton Falls, New Jersey.
David Denker, Chief Operating Officer
Not in the filing
stated, not guessed- Forward financial guidance was not provided.
- Prior outlook was not provided.
- Operating cash flow was not provided.
- Free cash flow was not provided.
- Share repurchases were not provided.
- Dividend information was not provided.
- GAAP tax rate was not provided.
- Sequential quarterly comparisons were not provided for the reported operating metrics.
- Percentage changes for individual revenue streams and expense lines were not provided.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.