Durango, Colo.-based Rocky Mountain Chocolate Factory (RMCF) has announced higher earnings for the Q1 2003, ended 31 May 2002.
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Non-retail revenues fell 0.1% to US$3.65m, compared with US$3.66m in the Q1 2002. Retail revenues meanwhile plummeted 44% to US$322,000, on the execution of the company’s strategy to exit its company-owned store programme.
On 1 May 2001, RMCF completed the conversion of substantially all company-owned stores to franchise-owned stores in order to focus its resources on supporting and growing its franchise base. Comparable- store sales at franchised stores fell 1.1% during the most recent quarter when compared with the Q1 2002. RMCF believes that the decline is due to the unusually early Easter holiday and the related short selling season. Comparable-store sales at franchised stores increased by about 3% in May, year on year.
Net earnings for the Q1 2003 increased 31% to a record US$459,000, compared with US$351,000 in the prior-year period. Basic earnings per share increased 29% to a record US$0.18 in the most recent quarter, compared with US$0.14 in the Q1 2002. Diluted earnings per share rose 21% to a record US$0.17 in the Q1 2003, compared with US$0.14 year on year.
COO Bryan Merryman commented: “I am very pleased to report our 10th consecutive quarter of higher earnings when compared with prior-year periods.
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By GlobalData“Net income of US$459,000 in the Q1 2003 represents the highest Q1 earnings in our company’s history. Operating income margins improved to 19.1% of revenues, compared with 15.1% in the year-earlier quarter, reflecting improved gross margins on factory product sales, a reduction in retail operating costs due to the sale of most company stores to franchisees last year, and a 9% reduction in general and administrative expenses.”
“Our franchisees opened five new stores during the Q1 2003. Four of these locations incorporate the new store design that was introduced last year, and the store in Broomfield, Colorado is our first ‘kiosk’ unit.”
“Current plans call for the opening of 25-30 new franchised retail outlets for the full year,” continued Merryman. “We are optimistic that our new store concept will significantly expand real estate opportunities for RMCF store locations in regional malls.”
“For the past several quarters, our company’s total revenues have declined from prior-year periods, reflecting the sale and transfer of all but four company-operated stores to franchisees. We completed the conversion of company-operated stores to franchise-operated status during the Q1 of last fiscal year. As a result, total revenues during the balance of FY 2003 and in future years should more accurately reflect the true growth of RMCF’s business model,” concluded Merryman.
