Rocky Mountain Profit Climbs

The company's CFO, Bryan Merryman, noted during the conference call that during the quarter Rocky Mountain "became the very first single-chocolate brand to surpass the 300 retail store mark." Merryman, also the chain's COO, noted that store openings accelerated in the most recent quarter, with franchisees opening 15 new stores in time for the Christmas selling season.

For the quarter, Rocky Mountain earned nearly $1.12 million, or 17 cents per diluted share, compared with $871,000, or 13 cents per diluted share, in the third quarter of the previous fiscal year. Revenue rose to $8 million, compared with $7.1 million in the third quarter of last year, although comparable store sales for company-owned operations declined more than 3% versus an increase of 1.1% in franchised comp-store sales.

Frank Crail, CEO of the company, contrasted the 30.8% increase in third-quarter diluted earnings per share with the second quarter's increase of only 6.3%. He explained that the second quarter suffered from unusually hot summer weather that typically reduces chocolate sales.

Rocky Mountain opened 27 new stores in the first nine months of this year, and the company expects to open another 10 to 15 new locations during the last fiscal quarter of the year. Interest from existing and new franchise operators remains high, according to Crail, who pointed out that Rocky Mountain has 25 signed franchised agreements with operators who are waiting to open new stores, a figure that is up from 18 last year at this time and also represents an all-time high for the chain.

"Our ability to put up stores is probably predicated more on finding really good locations to match to those leads than it is on the number of leads we have," Crail said. About half of the new stores each year are opened by new franchisees and the other half by existing operators, he said.

The company lags a bit behind its schedule of new store openings, Crail said, but only because of construction delays and other matters beyond its control, among them the speed at which developers complete new centers. "If the centers are new, we are captive to the developer being able to finish the center in time," the Rocky Mountain CEO said.

The chain is still opening a few kiosks, probably about eight or 10 this year, but most franchisees want an in-line store, according to Crail. He says Rocky Mountain generally turns to kiosks only when a mall doesn't have an in-line store available or when a franchisee that is already operating in a top-tier center wants a kiosk in a B or C class center in the same market.

Rocky Mountain and its franchisees operate 305 stores in 41 states, Canada, Guam and the United Arab Emirates. The company is also a manufacturer of premium chocolates and other confectionery products.