Specialty apparel retailer Charming Shoppes (NASDAQ:CHRS) will report Q4 2007 financial results on Wednesday, March 21, when we get to see whether it can charm the market.

What analysts say:

  • Buy, sell, or waffle? Of the 10 analysts who cover Charming Shoppes, three have been smitten and rate it a buy, while seven are still acting coy with a hold.
  • Revenues. What a difference a year makes. Revenues are forecast to rise 7% for the quarter to $863 million, far less than the 34% that was forecast last year.
  • Earnings. Profits, however, are expected to rise 27% to $0.19 per share.

What management says:
Unlike waiflike runway models, "real" women have curves. According to market research firm NPD Group, the clothing size of the average woman is 14, explaining why the plus-size category has blossomed into an $18.5 billion business. Charming Shoppes has charmed its way to a 40% share of the women's specialty plus apparel market, with Lane Bryant being its most profitable brand. Yet, like many retailers, it found the last fiscal year to be a challenging one. Where management had raised guidance to as much as $0.23 per share early on in the quarter, following a disappointing Christmas it scaled back those projections to, at most, $0.20 per share.

What management does:
While pinning future growth on its Lane Bryant brand, Charming Shoppes has found it to be a tight squeeze. It opened dozens of Lane Bryant Outlet stores last year, only to find they were taking sales away from the traditional stores. That would probably help explain the declining margins it experienced last year, a 180-degree turn from the rising margins it had witnessed in the year-ago period, and would help account for the weak 1% same-store sales growth it reported for the first nine months of the year.

Margin

10/05

01/06

04/06

07/06

10/06

Gross

31.1%

30.9%

30.7%

30.2%

30.4%

Operating

6.3%

6.0%

6.0%

5.4%

5.7%

Net

3.3%

3.6%

3.5%

3.2%

3.4%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Dangerous curves are still ahead for Charming Shoppes. Maidenform (NYSE:MFB) was finding nearly 5% growth in comps and 8% growth in sales for the fourth quarter. Dress Barn (NASDAQ:DBRN) also saw 5% growth in comps and 10% growth in sales. While management appears to have the issue of rising inventory under control (an issue that fellow Fool Rich Smith pointed out led to a decrease last quarter in inventory turns, another important retail metric aside from comps), the prediction of weaker sales might just show a bulging stockroom again this time around.

Yet it sports a very charming price-to-sales multiple that is well below the likes of Dress Barn and TJX Companies (NYSE:TJX), as well as an industry which continues to expand. Charming Shoppes hopes to lure more buyers with its recent acquisition of Crosstown Traders, where sales look promising so far. This Fool finds the allure of the retailer charming indeed, though the market may be looking for the stock to drop a bit in price.

Related Foolishness:

Charming Shoppes has earned a four-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock-rating service by joining today. It's free!

Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.