Parachute, parachute, kiss my toe!

Come Tuesday night, it's time for a quarterly update from children's outfitter and all-around playmate Gymboree (NASDAQ:GYMB). I'm donning a clown hat for the occasion and taking a look at the company's prospects.

What analysts say:

  • Buy, sell, or waffle? Three out of the nine analysts following the company rate the stock a buy. The rest prefer to hold. In Motley Fool CAPS, it's a three-star stock with 107 player ratings.
  • Revenues. The average forecast says $243 million, about 18% above the year-ago $206 million take.
  • Earnings. Analyst consensus points to $0.72 per share, or 20% more than the $0.60 per share reported last year. It's also the top end of management guidance, after an $0.08-per-share upward revision based on gymtastic December sales.

What management says:
Finding material for this part of the forecast isn't easy, as Gymboree management doesn't say much. These guys don't go for a lot of those analyst conferences, their last quarterly conference call has been removed from their phone system and website, and they don't pepper us with meaningless fluff releases. Call it frustrating or refreshing, but there isn't much to add here.

What management does:
Here's where Gymboree does its talking. See those climbing margins from top to bottom? Add the accelerating sales growth, and you have a recipe for fantastic financial results. After a December like that, there's no reason to believe that the growth is slowing quite yet, either.

Margin

7/2005

10/2005

1/2006

4/2006

7/2006

10/2006

Gross

38.4%

40.1%

43.1%

45.2%

46.2%

47.5%

Operating

2.7%

5.0%

8.3%

10.9%

12.1%

13.7%

Net

0.9%

1.9%

5.0%

6.5%

6.9%

7.3%

Y-O-Y Growth

7/2005

10/2005

1/2006

4/2006

7/2006

10/2006

Revenue

9.2%

10.7%

14.1%

15.4%

16.2%

18.3%

Earnings

(36.1%)

(17.7%)

92.6%

208.6%

239.5%

207.8%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
We already have the fourth-quarter sales numbers, landing at $238.5 million. The difference between that and the forecast above comes largely from the all-franchised Play & Music segment. That oft-overlooked operation tends to contribute about 1% of the company's revenues, but nearly 5% of operating profits. It's my sincere belief that these early-childhood educational programs could use some more corporate love, leveraging the retail stores to drive traffic to these programs instead of just the other way around.

It's what sets Gymboree apart from the likes of Baby Gap (the littlest member of the Gap (NYSE:GPS) family) and Children's Place (NASDAQ:PLCE), not to mention Target (NYSE:TGT) and Wal-Mart (NYSE:WMT). The costs of supporting the franchisees are pretty much fixed, except for the training of new activity leaders. Signing up LeapFrog (NYSE:LF) for some unique pre-preschool learning programs was a start, but there have to be other opportunities out there.

Wal-Mart and Gap are two of our Motley Fool Inside Value selections, and Gap is also a Stock Advisor pick. Find out more with a couple of free 30-day trials.

Fool contributor Anders Bylund is a Gymboree shareholder but holds no other position in any of the companies discussed here. Here's a shout-out to Miss Carol and her crew -- the kids love you, ladies. You can check out Anders' holdings if you like, and Foolish disclosure is always a good idea.