Profits at Rocky Mountain Chocolate Factory decreased by 53.8% for its fiscal year 2020 to $1 million and the rocky road for the chocolatier does not appear to be getting easier as COVID-19 restrictions limit sales and increases costs.
For fiscal year 2019, RMCF had a profit of $2.2 million.
“We have experienced business disruptions resulting from efforts to contain the rapid spread of the novel coronavirus (COVID-19), including the vast mandated self-quarantines and closures of nonessential business throughout the United States and around the world,” the company said in a news release announcing results.
For the company’s 2020 fiscal year’s fourth quarter, which ended on Feb. 29, the publicly traded Durango chocolate maker recorded a net loss of $524,000 compared to net income of $386,000 for the fourth quarter of fiscal year 2019.
RMCF saw total revenue decrease 7.8% for fiscal year 2020 to $31.8 million, down from $34.5 million for fiscal year 2019.
Same-store pounds of candies, confections and other products purchased from the RMCF factory in Durango decreased 4.6% in fiscal year 2020 compared with the previous year.
Retail sales for fiscal year 2020 declined 5.4% to $3.2 million compared with $3.4 million in 2019.
The company news release added, “Nearly all stores have been directly and negatively impacted by public health measures taken in response to the COVID-19 pandemic, with nearly all locations experiencing reduced operations as a result of, among other things, modified business hours and store and mall closures. As a result, franchisees and licensees are not ordering products for their stores in line with forecasted amounts.
“This trend has negatively impacted, and is expected to continue to negatively impact, among other things, factory sales, retail sales and royalty and marketing fees of the company.”
On May 11, the board of directors suspended RMCF’s first quarter cash dividend “to preserve cash and provide additional flexibility in the current financially challenging environment impacted by the COVID-19 pandemic.”
RMCF, Durango’s only publicly traded company, also noted that it had entered into a long-term alliance with Edible Arrangements to be the exclusive provider of branded chocolate products to EA.
The chocolatier entered into a long-term alliance with EA to become the exclusive provider of branded chocolate products to EA and its affiliates and its franchisees.
Edible Arrangements creates arrangements, similar to flower arrangements but largely with fruit and other edible products, like chocolates.
According to the news release, the strategic alliance represents the culmination of the Durango chocolatier’s exploration of its strategic alternatives, including sale of the company, which was announced in May 2019
Edible will sell a wide variety of chocolates, candies and other confectionery products produced by the RMCF or its franchisees through Edible’s websites.
Edible will also be responsible for all ecommerce marketing and sales from the Rocky Mountain Chocolate Factory corporate website and the broader Rocky Mountain Chocolate Factory ecommerce system.
In June 2019, RMCF’s largest customer, FTD Companies Inc., filed for Chapter 11 bankruptcy proceedings.
RMCF warned it is uncertain if debts owed to the chocolatier will be paid at full value “or if any revenue will be received from FTD in the future.”
The chocolatier has also taken out a $1,429,500 Paycheck Protection Program loan from 1st Source Bank of South Bend, Indiana.
RMCF does not have to make any payments on the loan until Nov.13, and under conditions of the PPP loan, the loan can be forgiven if the chocolatier meets requirements set by the federal government aimed at protecting workers from being furloughed or laid off during the COVID-19 pandemic.
Any portion of the loan not forgiven must be paid off by April 14, 2022, at an interest rate of 1%.
“During this challenging and unprecedented time, our foremost priority is the safety and well-being of our employees, customers, franchisees and communities,” said Bryan Merryman, CEO and chairman of the board, in a news release from the company.
“Management is taking all necessary and appropriate action to maximize the company’s liquidity as we navigate the current landscape,” Merryman said. “These actions include significantly reducing our operating expenses and production volume to reflect reduced sales volumes as well as the elimination of all non-essential spending and capital expenditures.
“Further, in an abundance of caution and to maintain ample financial flexibility, we have drawn down the full amount under our line of credit and we have received loans under the Paycheck Protection Program. The receipt of funds under the Paycheck Protection Program has allowed us to avoid workforce reduction measures amidst a steep decline in revenue and production volume.”