On Nov. 15, children's outfitter and playful educator Gymboree (NASDAQ:GYMB) released Q3 2006 earnings for the period ended Oct. 28.

  • Disciplined inventory control led to a substantially tighter cash conversion cycle. There's some seasonality at play here, as Gymboree tends to build up inventories in Q2 and Q3 and sell it all off in the holiday season, but that buildup was smaller than usual this year.

  • All of the margins are growing up so fast. In fact, so are the kids on the income statement. 21% higher sales with 28% wider net margins? That's raking in some impressive dough, Gymbo.

  • And most of that growth was organic, too. The store count increased by only 3.6% over the past year and now stands at 709, which means that the average store contributed $304,000 in sales and $41,600 of operating income versus last year's $267,700 and $31,400, respectively.

(Figures in millions, except per-share data)

Income Statement Highlights

Q3 2006

Q3 2005

Change

Sales

$215.6

$177.5

21.5%

Net Profit

$17.4

$11.2

56.1%

EPS

$0.53

$0.35

51.4%

Diluted Shares

32.7

32.1

2.1%



Get back to basics with a look at the income statement.

Margin Checkup

Q3 2006

Q3 2005

Change*

Gross Margin

48.98%

46.04%

2.94

Operating Margin

13.17%

11.49%

1.68

Net Margin

8.08%

6.29%

1.79

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets

Q3 2006

Q3 2005

Change

Cash + ST Invest.

$123.1

$92.4

33.3%

Accounts Rec.

$14.2

$12.1

17.8%

Inventory

$104.7

$100.8

3.8%



Liabilities

Q3 2006

Q3 2005

Change

Accounts Payable

$54.3

$45.4

19.5%

Long-Term Debt

$0.0

$0.0

N/A



Learn the ways of the balance sheet.

Cash Flow Highlights

The company omitted this vital information. We want, we want cash flow!

Find out why Fools always follow the money.

Retail Checkup

Q3 2006

Q3 2005

Change

Days in Inventory

81.4

89.4

(8.0)

Days in Receivables

5.4

6.4

(1.0)

Days Payables Outstanding

40.4

40.3

0.1

Cash Conversion Cycle

46.4

55.4

(9.0)



Read up on cash conversion metrics.

Related Companies:

  • Target (NYSE:TGT)
  • The Children's Place (NASDAQ:PLCE)
  • Baby Gap (NYSE:GAP)

Related Foolishness:

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At the time of publication, Fool contributor Anders Bylund had no position in any company mentioned, but his family contributes staggering amounts to Gymboree's sales. Fool rules are here .