Thursday, December 26, 2013

RMCF: This Chocolate Covered Stock Is Not Really Sweet

Rocky Mountains Chocolate Factory (NASDAQ:RMCF) is a low-risk small cap stock but it has struggled with growth and has failed to recover after the financial crisis. More importantly, there are serious question marks over the company’s ability to deliver long term growth. 

Rocky Mountains Chocolate Factory (RMCF) is a 30 year old international franchiser, manufacturer and retailer of chocolate candies and other confectionery products from Colorado. The company, with a market cap of $82 million, operates through 457 stores and kiosks located in the United States, Canada, Japan, South Korea and the United Arab Emirates. The company manufactures its products at its 53,000 square foot factory which are then supplied to its franchisees. Most of these stores are located in the United States. The business delivers its products using its fleet of refrigerated trucks to its franchise stores.

In its most recent fiscal year (FY-2013), Rocky Mountain Chocolate Factory's production facility produced 2.67 million pounds of chocolate candies, up 2% from in FY-2012. The company's annual production capacity is 5.3 million pounds. The company has expanded in international markets and has significantly increased its store count after the U-Swirl transaction. However, it has struggled with no organic growth and an average of just a 3% increase in annual revenues in the last five years.

U-Swirl Transaction

Rocky Mountain Chocolate Factory was also the founder and owner of Aspen Leaf Yogurt, a franchiser and retailer of frozen yogurt. Earlier in January, Rocky Mountain Chocolate Factory acquired all of the franchise rights of YHI Inc and Yogurtini International who are the franchisers of the brand "Yogurtini". Then two weeks later, Rocky Mountain Chocolate Factory sold Aspen Leaf Yogurt's assets to U-Swirl (OTCQB:SWRL) for a 60% controlling stake … read full article at Seeking Alpha