Shares of Durango, Colo.-based gourmet chocolate company Rocky Mountain Chocolate Factory
Rocky Mountain said first-half sales rose almost 13% to $10.6 million on the back of both franchise expansion -- the company currently operates 271 (mostly) franchised and company-owned stores in the U.S., Canada, Guam, and the U.A.E. -- and retail same-store sales growth of 5.6%. Net income, meanwhile, jumped more than 50% year over year. That can't have hurt the shares; neither can the news that the growth came without a big order the company says will show up in Q3 instead of Q2, as was the case last year.
Those are some pretty solid growth numbers, and they (along with a boosted dividend) make it clear why investors were excited about the shares yesterday. There are certainly reasons to be: The company is profitable, growing, generating free cash flow, and paying down debt while paying a dividend. There are issues, however: Bill Mann has already covered the company's iffy (if not uncommon) use of stock splits -- while also vouching for Rocky's quality -- in past writings.
The biggest question as the company's shares head toward past Rocky Mountain highs, however, is a different one: For this confectioner to keep growing, it will have to continue adapting its business from a walk-up operator housed primarily in destination outlet malls and touristy locations to a place that can compete with regional mall residents for everyday year-round traffic.
That's meant a new store design, new marketing, and even the introduction of kiosks. It's encouraging to see that management is willing and able to look for new ways to get its goods to customers -- but it also means investors must watch these relatively recent initiatives closely to gauge the long-term health of the concept.
Fool contributor Dave Marino-Nachison doesn't own shares of Rocky Mountain.
