1 Retailer Standing Out in a Sea of Success

March was a hot month, both with regard to temperature and retailer performance. Sifting through some of the most impressive numbers recently, I wanted to highlight some of the biggest winners, and see which company has what it takes for a repeat performance.

The yardstick
Of the 21 chains that had reported by yesterday, RetailSails noted a 6% increase in revenue for the month of March, on average, year over year. Same store sales for the chains were up an impressive 4.4%, closing out the 31st straight month of gains.

This is truly an impressive figure, and has caused many to cheer that middle-class America is back on its feet. But, before we jump in with both feet and our whole portfolio, let's look at some of the factors driving this growth. This year's impressive March sales figures benefited from an early Easter, unseasonably warm weather, and comps with a chilly 2011. These three factors all generously boosted many stores' performances.

With our goalpost in better perspective now, let's take a look at those companies with the most impressive sales growth year over year.

Considering that these companies represent five of the top seven year-over-year gainers as reported by RetailSails, one trend starts to stand out: affordable or discount retail.

Costco, Ross Stores, and TJX all wrote the book in one way or another on offering off-price or deeply discounted products. Target is the haven of cheap chic, and Gap, while not a discount retailer by design, is decidedly affordable in the spectrum of fashionable retail.

Taking a closer look at their divisions reinforces this. Gap North America realized 9% same-store sales growth, while their more upscale and expensive Banana Republic division only saw 5% growth in comps.

This is encouraging, as it's been the low and middle classes that bore most of the brunt in our economic crisis. These figures indicate they are both willing and able to spend again.

Who is top dog
Many investors are looking to capture a piece of this momentum and may be drawn to TJX or Ross Stores' monster numbers. While those may be good picks, and one Fool has named them as two of three hot stocks to buy this week, I think there is a better long-term pick here. Gap could be another contender, but is a somewhat risky turnaround play, and has already risen 41% year to date.

Instead, I'm looking at Costco, which has been a longtime high-conviction stock of mine. Costco consistently ranks near the top of the list for retail sales per square foot, right up there with gadget slinger Apple and shiny-things-seller Tiffany. Unlike the other retailers on this list, it has a consistently captive audience through its membership program.

Despite the counterintuitive system of having to pay to shop, Costco has achieved an incredibly enviable 88% renewal rate with its membership fees year after year, and it shows no sign of waning. The company also achieves top marks for employee satisfaction, out-paying nearest rival Sam's Club.

Having happy employees and eager customers is a Foolish recipe for success. While it may trade at more expensive multiples than other retailers out there, I think it's worth the slight premium to invest in a company that's built an ironclad foundation for continued excellence. Happy employees means less turnover, and a high renewal rate indicates a dedicated customer base.

Not only that, Costco's bare-bones margins are always in fashion for consumers, in good times and bad.

Even better?
Of course Costco's profit machine model couldn't go unnoticed forever, and there is one emerging market retailer that's parroting the system with huge success. Fortunately, it's still largely undiscovered by Wall Street, which is just one reason we've named it The Motley Fool's Top Stock for 2012. You can learn more by clicking here.