Rocky Mountain Chocolate Factory, Inc. (RMCF), 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 first quarter of FY2011.
For the three months ended May 31, 2010, total revenues increased 14.2 percent to approximately $7.6 million, compared with approximately $6.7 million in the first quarter of FY2010. Same-store sales at franchised retail units increased 0.7 percent during the most recent quarter, when compared with the prior-year period. Total factory sales rose 10.9 percent, primarily due to a 15.8 percent increase in shipments of product to customers outside the Company’s network of franchised retail stores, an increase in sales of product to Cold Stone Creamery co-branded locations, and a 0.5% increase in same-store pounds purchased by domestic franchisees, partially offset by a 4.4% decrease in the average number of franchised stores in operation.
Net income increased 24.6% to approximately $932,000 in the first quarter of FY2011, versus approximately $748,000 in the first quarter of FY2010. The improvement in earnings was primarily due to higher same-store sales at franchised locations, increased factory product sales, a 110 basis-point improvement in factory margins, and increases in franchise fees, royalty income and marketing fees, when compared with the prior-year period. Basic and diluted earnings per share increased 25% to $0.15 in the most recent quarter, compared with $0.12 in the first quarter of FY2010.
“We are pleased to report a 24.6% increase in earnings during the first quarter of FY2011, despite continued economic uncertainty and only modest gains in customer traffic at retail shopping malls and in other retail venues where our stores are located,” commented Bryan Merryman, Chief Operating Officer and Chief Financial Officer of Rocky Mountain Chocolate Factory, Inc.
Management is encouraged by slight improvements in same-store pounds of products purchased from our factory in Durango by franchisees and double-digit percentage growth in sales to customers outside of the retail store network. This represented the second consecutive quarter of positive same-store sales comparisons, following nine quarters of declines, and management remains ‘cautiously optimistic’ regarding the balance of the fiscal year.
Although franchisees have continued to grapple with a very difficult credit environment, two domestic franchised Rocky Mountain Chocolate Factory stores, along with seven Cold Stone Creamery co-branded locations, opened in the most recent quarter. While the average number of domestic franchised stores in operation declined 4.4 percent during the past 12 months due to the impact of economic recession and tight credit markets upon certain franchisees, only 6 stores closed during the first quarter of FY2011. When the company closed out the first quarter on May 31, 2010, the Company and its franchisees operated 347 stores, including 26 co-branded Cold Stone Creamery units, and 11 stores had been sold to franchisees or licensees but were not yet open”
Operating cash flows remained strong during the quarter ended May 31, 2010. Approximately $1.6 million in net cash was generated by operating activities, which was more than double the combined total of capital expenditures and cash dividends paid to shareholders. Cash and cash equivalents increased 18% to $4.4 million at the end of the first quarter, compared with $3.7 million as of February 28, 2010. The balance sheet reflected a healthy 3.8-to-1.0 current ratio (with no debt outstanding) and stockholders’ equity approximated $15.2 million as of May 31, 2010.
During the first quarter of FY2011, franchisees opened new stores in Delafield, Wisconsin, Sudbury, Ontario and Woodbridge, Virginia as well as Cold Stone Creamery co-branded stores in American Fork, Utah, Charlotte, North Carolina, Layton, Utah, Orlando, Florida, Pleasantville, New York, Springfield, Missouri and Taylor, Michigan.
On June 11, 2010, the Company paid its 28th consecutive quarterly cash dividend, in the amount of $0.10 per share, to shareholders of record May 27, 2010.