Should You Turn Around and Head for New York & Company?

While betting on a turnaround situation can be dangerous, New York & Company (NYSE: NWY  ) might be worth considering. The women's fashion retailer has been shot down from its highs of a few months ago, but the company is still profitable and it appears to be successfully improving its operations and outlook. As you can see from competitors Christopher & Banks Corporation (NYSE: CBK  ) and ANN (NYSE: ANN  ) , there's still opportunity for companies in this space to perform well.

New York & Company's results
New York & Company reported fiscal third-quarter results on Dec. 4. Net sales fell just 0.8% to $217.6 million despite the retailer having fewer stores. Same-store sales jumped 3%, rising in each of the company's three business channels. Net loss came down 10.5% to $3.4 million. It was the seventh quarter in a row of improved results.

CEO Gregory Scott credited the improved results in part to "new product and marketing initiatives" and "investments in growth initiatives." The improvement came despite what Scott described as "softer traffic patterns than planned."

Black Friday was a slam dunk. The company saw a mid-single-digit percentage gain in same-store sales. It was the highest average store volume in New York & Company's history. Scott believes that the rest of the holiday season will also be strong for New York & Company. In the current fourth quarter, the company expects operating income between $3 million and $7 million. This isn't huge, but it's a great start for New York & Company as it turns itself around.

Conference call
In the call, Scott pointed out that the launch of the "Eva Mendes Collection" was particularly promising as it exceeded the company's expectations. The launch served to increase sales among current frequent customers and brought new customers in the doors. This was despite a "small launch" during the quarter which the company plans to expand to all of its stores in the spring of 2014. Traffic spiked in September which coincided with this small launch. Scott called it a "tremendous response," and the average amount spent per customer went up.

Scott mentioned something particularly encouraging about Black Friday. Not only were sales up, but profit margin on those sales was also up. This is important because a lot of retailers are seeing spikes in sales only because they severely discounted and sacrificed profit in order to move their inventory. For months, the company has planned marketing initiatives specifically targeted at the last 12 days of the holiday season and it expects to see another wave of traffic and sales.

Analysts expect earnings per share of $0.10 for the holiday quarter. Based on the optimism and excitement the company showed in the conference call, don't be surprised if that gets beaten.

Christopher & Banks banking
Turning to Christopher & Banks, this competitor is in a similar situation to New York & Company but further along. Last quarter the company reported sales up 0.7% although it had 7.3% fewer stores. Same-store sales leaped 4.9% and net income rocketed 139% to $8.6 million. Christopher & Banks, like New York & Company, expects a strong holiday season as well as strong performance in 2014 and beyond. The company credits its successful turnaround and outlook to simply merchandising and marketing. This gives hope that New York & Company can follow a similar path.

ANN can
Meanwhile, ANN is also doing quite well. Last quarter, revenue jumped 7% to $657.5 million. Same-store sales rose 3.7% even going against a 5.5% rise in the year before. Earnings per share increased 17.1% to $0.76. CEO Kay Krill partially credited ANN's success to merchandise and marketing, just like New York & Company and Christopher & Banks. Analysts expect ANN will grow EPS 11% this year and 14% next year.

Final foolish thoughts
New York & Company's stock price is down, but the company is far from out. For Fools looking for a turnaround situation at a company that's still profitable, improving, and which has a strong outlook, take a look at New York & Company. Unlike other turnaround situations, speculation is only part of the story and part of the valuation here. As Christopher & Banks and ANN demonstrate, there is plenty of room for potentially profitable growth for New York & Company.

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