By
Anders Bylund (TMFZahrim)
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August 23, 2007
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I love owning stock in Gymboree (Nasdaq: GYMB ) . Where else can you benefit from strong sales of dinosaur prints and school uniforms?
As previously announced, Gymboree's retail brands turned in a strong 5% comps performance, on top of a 12% comparable-stores gain in the previous year. President Kip Garcia said that a marketing push for the previously underperforming collection of boys' clothes is paying off, with a particularly nice result from back-to-school outfits and school uniforms. The same trends held true for the upscale Janie & Jack brand, with strength in school-oriented outfits and boy gear.
With that kind of brand strength, it's not surprising to see Gymboree pushing out new stores as fast as it can. There are now 739 Gymboree-owned stores sprinkled throughout the malls of America and Canada, with 32 more planned to open in this quarter alone. And all of this is done with no debt on the balance sheet; it's financed entirely by free cash flow.
It's the same lean haste that powers Hidden Gems pick Buffalo Wild Wings (Nasdaq: BWLD ) to impressive revenue gains, in stark contrast to the leveraged growth models of competitors like Stride Rite (NYSE: SRR ) or Carters (NYSE: CRI ) . Children's Place (Nasdaq: PLCE ) is having trouble even turning a profit these days, and its comps are flat at best. And Gymboree is growing faster than any of these kids' clothing challengers.
And you know what? I think the best is yet to come. Gymboree is still trying out new store brands and working hard to make retail customers out of the roughly 400,000 Play & Music participants out there. The company is expanding the upper end of its covered age range to keep customers addicted for a bit longer, and there are many more growth initiatives going on than I could mention in this limited space.
Since CEO Matt McCauley took over the reins in early 2006, the share price has jumped more than 75%, and I think he's only warming up. Keep an eye on Gymboree, dinosaur prints and all.
Further Foolishness:
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Motley Fool Hidden Gems
recommendation, and Carters is a
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pick. Try any one of our investing services free for 30 days.
Fool contributor Anders Bylund owns shares in Gymboree and Buffalo Wild Wings, but holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and the Foolish disclosure looks cute in dinosaur pajamas.
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