Tic-tac-toe, Hidden Gems members want to know: After beating Wall Street earnings estimates for two straight quarters, can retailer New York & Co. (NYSE:NWY) make it three in a row when it reports fourth-quarter and full-year 2006 results on Thursday?

What analysts say:

  • Buy, sell, or waffle? Well, look who's popular now! With four new analysts joining the NY & Co. crew, the stock now gets four buy ratings, five holds, and a pair of sells.
  • Revenues. On average, they're looking for 11% quarterly sales growth to $392 million.
  • Earnings. Profits, however, are predicted to rise just 5.6% to $0.38 per share.

What management says:
The most recent news out of New York was of positive sales trends. This year's February sales came in 8.9% stronger than we saw in February 2006, and same-store sales in particular were positive to the tune of 2.7%. For what it's worth, going forward, CEO Richard Crystal thinks the firm's "new spring line will resonate well with our customers," and keep the cash registers ringing. By way of comparison, New York's same-store sales performance stacked up well against rival Limited Brands (NYSE:LTD), and trounced the worsening results at Abercrombie & Fitch (NYSE:ANF), bebe (NASDAQ:BEBE), Chico's (NYSE:CHS), Ann Taylor (NYSE:ANN), and Gap (NYSE:GPS).

I'd also point out that the 2.7% comps performance is an improvement on the 2.3% rise posted in January, the 1.2% growth for the full fourth quarter, and the 2.6% decline posted for fiscal 2006. (Oh, yes. I forgot to mention that the sales results came out last month, didn't I? Quarterly sales came in at $390.3 million, just shy of analyst estimates.)

What management does:
Last quarter, New York showed signs of finally getting its groove back. The slide in rolling gross, operating, and net margins stopped and shifted into reverse. This still left the firm far less profitable (margins-wise) than it was a year ago, but at least it's heading back in the right direction.

Margins

7/05

10/05

1/06

4/06

7/06

10/06

Gross

34.2%

32.8%

32.4%

30.8%

30.0%

30.9%

Operating

10.3%

9.7%

9.3%

7.0%

6.0%

6.6%

Net

4.4%

5.2%

5.2%

3.8%

3.3%

3.7%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

One Fool says:
Since last we "Forecast" a New York earnings report, Motley Fool senior analyst Bill Mann has had time to provide his semiannual thoughts on the Hidden Gems pick. To wit: "For a while, it looked like a turnaround that wouldn't. Now, I see a hint of light." With the fall in margins finally halted (?), Bill argues that, "Sooner or later, New York & Co. will consistently put clothing on the racks that people really like. When it does, it's going to have a full year or more of really easy comparisons in the same-store sales number to go up against. Buy below ..."

"Buy below what?" you ask. Claim your free trial membership to Hidden Gems, and find out what price is nice.

What did we expect to see in New York last quarter, and what did we get? Find out in:

Bebe and Gap are both Stock Advisor selections. Gap is also an Inside Value recommendation. Income Investor picked Limited Brands as a winner. Click here to take any of our newsletters for a free 30-day trial.

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