Nothing New at Chico's

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Lately, not a day goes by that I don't thank the financial press and the dippy headline writers who helped tank Chico's FAS (NYSE: CHS) a few months back for no real reason. The Street's resulting hissy fit got me into a great company at a great price, providing a quick 50% gain.

But you know what's even better than that? The promise of more to come. Today's January sales release proves how foolish (very small f) it has been to predict doom for this firm's same-store revenues. Remember last month, when Chico's reported three times the comps growth that analysts predicted?

Well, they didn't clobber it out of the park like that, but January's full sales gain came to 23.6% over last year, with comps ticking up a respectable 8.2% That puts fourth-quarter sales 32.5% higher than last year, with the comps gain at 12.9%.

But the real delight at Chico's isn't the sales growth, it's the way the firm continues to leverage that growth into increased profits. Net margins have improved consistently over the last eight quarters up to the current 13.8%. That figure is 2-3% better than the operating margins at competitors such as Ann Taylor (NYSE: ANN) and Talbots (NYSE: TLB). It's a full 10 points better than the operating margins at J. Jill (Nasdaq: JILL). By the time you get to bottom-line comparisons, it's just not fair to call these other companies "competition." Also-ran might be a better word.

How many clothing retailers have that kind of earnings firepower? If you can find 'em, consider investing in 'em. And if you can't, consider Chico's. Though shares are no longer ridiculously cheap, the firm should provide plenty of growth for long-term investors.

For related Foolishness:

• Bling beats the bargain bin, folks.
• Keep your eyes open for Ann's wardrobe malfunction.
• Compare the three chic stocks.
• Why were investors shouting, "Oh Bebe"?

Chico 's has delivered 20% since it was singled out in our annual stock-picking guide for 2004. And it was one of the laggards. If you'd like your portfolio's dogs to notch 20% gains, click here to take a look at what the Fools have dug up for 2005.

Seth Jayson used to think retail was a sucker's investment, until he met Chico's. At the time of publication, he had shares of Chico's, but no position in any other firm mentioned. View his stock holdings and Fool profile here. Fool rules are here.