World Market operator Cost Plus (NASDAQ:CPWM) closes out yet another miserable year this week. After three more quarters of disappointment, about the only question remaining is: When the Q4 and full-year numbers come out Thursday afternoon, how bad will they be?

What analysts say:

•  Buy, sell, or waffle? Fifteen analysts follow Cost Plus. Only one of them thinks the company is a buy. The rest split down the middle -- seven holds, seven sells.

•  Revenues. Quarterly sales are expected to rise 8% to $395.8 million.

•  Earnings. Profits are predicted to plunge 13% to $0.84 per share.

What management says:
Management gave us a peak behind Thursday's earnings news-curtain back in February, when it revealed its Q4 and full-year 2006 sales numbers. Sales appear to have edged out Wall Street's best guess with an 8.1% rise to $396.7 million in the fourth quarter, even as same-store sales slid 3.9%. That brought annual sales for the 53-week fiscal year 2006 to $1.04 billion, or 7.2% better than the 52-week fiscal 2005.

So, is that good news, that sales grew faster as the year progressed? Not so fast. Same-store sales for the year only slid 3.3% -- so from a constant-store-count perspective, things are still getting worse at Cost Plus.

What management does:
Just like similar ware-selling Pier 1 (NYSE:PIR), Cost Plus had a miserable time of it for most of 2006. Gross, operating, and net margins all continued to slide, and going into the fourth quarter, the firm had a negative net margin for the trailing 12 months. Let's hope Thursday's news can pull Cost Plus' annual bottom line back into the black.

Margins

7/05

10/05

1/06

4/06

7/06

10/06

Gross

34.1%

34.1%

33.7%

32.9%

31.5%

30.9%

Operating

4.7%

4.3%

4.2%

3.1%

1.4%

0.1%

Net

2.7%

2.3%

2.1%

1.6%

0.3%

(0.6%)
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:
Returning to February's sales update, we get a couple clues on why that may -- or may not -- happen. CEO Barry Feld confided then that his stores had to take "the necessary markdowns in January to clear "... certain home decor merchandise categories" that had not been selling well. Cost Plus is pretty good at inventory management, by the way. Over the last couple of quarters, as sales rose a modest 6%, inventories grew only an even more modest 3%. Getting rid of slow-selling inventory early means the firm won't need to cut prices (and profit margins) in future quarters, once inventories have gotten totally out of hand. Speaking of hands, though, on the other hand, those markdowns still affected Cost Plus' margins in Q4. The only question now -- and what we'll be looking at when the news comes out -- is how much.

How did Cost Plus do last quarter? Relive the bad news in: A Costly Trend at Cost Plus.

Fool contributor Rich Smith does not own shares of any company named above.