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Rocky Mountain Chocolate Factory sees a batch of bad data in Q3

Poor Rocky Mountain Chocolate Factory (NASDAQ: RMCF). Chocolate is supposed to be sweet, delicious, fun! It's supposed to be a driver of shareholder value. Alas, in the third quarter, chocolate did nothing for shareholders of this company.

So where do I start? Revenues decreased 15%. Comps at franchised locations dipped over 8% (don't you hate it when comps do that?). Net income on a dollar basis dropped 33%. And earnings per share on a diluted basis declined 26% to $0.14. Do you notice a trend here? From the top to the bottom lines, it seems like everything is headed in one depressing direction. Yep, the economy hasn't been kind to the company's gourmet confections. And I don't necessarily see a quick turnaround for Rocky Mountain. Yes, it is still opening stores and is apparently optimistic about the future. Still, I think it's going to be a long journey back to growth. Hey, if Hershey (NYSE: HSY) is having a tough time with its stock price, you can imagine how Rocky Mountain's management is feeling. The earnings release does mention work on a new business model for locations in smaller markets, as well as a focus on return-on-invested-capital in these territories. A laudable goal, certainly, and I like some of the co-branding concepts that were also touched upon. Doesn't necessarily change my bearish thesis, however.

Of course, you have to wonder if this stock is a value right now. I mean, it does sport a dividend yield of almost 7% by my calculation (based on Thursday's closing price of $5.88). But the stock isn't too far from the 52-week low of $5.04. That would make me kind of scared to buy at the current price level. I'd rather see the stock pull further away from the low before considering locking in that sweet yield. I just have the feeling that it might break the 52-week low as the negative news flow about macro events continues to saturate the markets. One could make an argument, though, that an investor better start positioning herself to take advantage of the eventual rebound in the overall equities environment. I've been careful about keeping that in mind. I'm not sure, though, that we're there yet. Besides, there are other opportunities out there that are probably better than Rocky Mountain Chocolate Factory.

Source: BloggingStocks

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