For many years, apparel-centric retail company Chico's (NYSE:CHS) had its growth game on solid ground. Same-store sales at its three chains -- Chico's, White House Black Market, and Soma -- were heading in the right direction. It was expanding its footprint, and life was good. That all ended when the Great Recession started, and apparently, the situation is only getting worse.

In this segment of the Nov. 28 Market Foolery podcast, host Chris Hill and MFAM Funds' Bill Barker discuss why. On the other side of the equation, they dig into the numbers to tease out an explanation for how the more basic business formerly known as Burlington Coat Factory has translated fairly good top-line growth into huge bottom-line gains, and a share price performance that has outpaced some tech all-stars over the past five years.

A full transcript follows the video.

This video was recorded on Nov. 28, 2018.

Chris Hill: I shouldn't be glib when I say bloodletting, but I was stunned to see what is happening to Chico's stock today. The third-quarter results for Chico's resulted in the stock dropping close to 40% today. They've got at least one executive leaving. Chico's has been public for 25 years. Probably not surprising to anyone that the stock being down 38% this morning represents the biggest single-day decline in that time. How bad is this? Because this is now a $550 million company with a 40% drop in one day? [laughs] Is this a business that now needs to, as they say, consider strategic alternatives?

Bill Barker: First of all, for those that don't know Chico's, the full name of it is Chico's FAS. I would have, before today, said, "For some reason, the name is Chico's FAS." But I went to all the trouble of looking up why that is. Originally, it was Chico's Folk Art Specialties, which is the very first store that they had. After they expanded and franchised, they reduced it to FAS. They're now much more just doing fashion, which was only a small part of the original store.

As you mentioned, they've been around for a while. They had a phenomenal growth trajectory in the '90s and '00s, really right up through about 2008, when the growth basically stopped. Now, we're looking at a contraction. I talked last week about the golden equation for retailers, which is you've got good same-store sales or comps, and that allows you to build more stores, so your total sales are growing faster than either your comps are growing or your store square footage is growing. They're both growing. They combine to give you a top line that's growing, hopefully, in the double-digits. Because you're getting bigger, your margins get better, because you have to spread your costs over more. Then, maybe you've got enough money left over after doing all that to buy back some shares, so your earnings per share grow even faster than any of those other things. And it's all great. That was the Chico's equation when things were going well.

They've got three brands: Chico's, White House Black Market, and Soma. All of them are seeing same-store sales declines, and have seen for every quarter of the last five, except in the most recent quarter, Soma, which is the smallest element, grew 2%. Chico's, which is the biggest, same-store sales were down 10%. You can't do that for very long. So, that's why the Chico's CEO -- that's the Chico's brand CEO, not that Chico's FAS total holding company CEO -- was shown the door, I would say. They believe they've gotten the fashion wrong and they need to do things differently with their fashions.

Hill: On the flip side, Burlington Stores (NYSE:BURL), which once upon a time was Burlington Coat Factory, is up on their third-quarter report. As you mentioned to me this morning, that stock's done really well over the last few years. I went back and looked --

Barker: Because you didn't believe me.

Hill: I didn't believe you. Over the last five years, shares of Burlington Stores -- which is a basic retailer that sells, among other things, coats -- I was saying to you right before we started taping, I think the closest Burlington Store to where we're sitting right now is up Route 7. It's a few miles from here. I went there a year ago.

Barker: Did you need a coat?

Hill: I didn't need a coat. I'll just say that walking into that traditional bricks and mortar retailer, I would not have left that place thinking to myself, "Boy, this is a well-oiled machine. They are probably crushing it." Quite the opposite. So, the fact that over the last five years, shares of Burlington Stores have done better than shares of Amazon (NASDAQ: AMZN) or shares of Netflix (NASDAQ: NFLX)is astonishing to me. What are they doing?

Barker: They're doing that equation, with the comps. And they're doing it to a degree that allows you to have a 10x on your stock over five years. For the most recent quarter, they had comps up -- let me get the number right, because it's not that impressive -- 4.4%. Then you get down to the bottom line, and their earnings per share grew 73%. Well, how do you line up those numbers? Because they're adding stores. They're still small enough that they can add stores. They're not saturated. Their total sales were up 13.7%, almost 10% more than the comp numbers. Margins improved everywhere. And they bought back a few shares. Earnings per share up 73% sounds better than it really is because a lot of that has to do with reduced taxes. Still, earnings per share were up 73%. That's a number that is going to drive your stock price higher.

Hill: I'm still baffled. [laughs] I'm still baffled that this very basic, largely clothing retailer -- yes, they sell some home goods and that sort of thing, but Burlington is, I would say first and foremost, a clothing retailer, a pretty basic one at that. The fact that the stock has done this well for five years is still mind-blowing to me.

Barker: Yeah. I wish I had owned it for the last five years, [laughs] because it's quite a surprise. It's really grown the top line at a much slower pace than you would think must be the case for a stock that has done as well as it has. It has $6.6 billion in last 12 months sales. That's up from $4.4 billion in the year that ended in February 2014. They've grown sales less than 50% over that time, but they've grown their earnings a lot more. They were pretty cheap as a stock. They weren't really making much. The first year, I think they made $0.13 a share. Now, they're making $5 a share. $6 a share was the guidance for the rest of the year.

Hill: Do you think they want to take some of their cash and buy Chico's? [laughs]

Barker: No. [laughs] No. I mean, it's hard enough to get one retail store right. You can diworsify by getting another brand, as many companies have learned. Look, Burlington is on the right side. It's off-price fashion, so it's not as fashion-sensitive as a lot of other things. People there are buying more for the price than being on track with the fashion. But still, they'll get it wrong at some point. Things won't look as great as they do today. That happens to every fashion retailer sooner or later.

Hill: That's true. You just reminded me of Gap (NYSE:GPS). You look at a company like Gap, which has Gap, Old Navy, and Banana Republic, and it seems like clockwork, every quarter, at least one of those three is not doing well. And lately, it's been the namesake Gap stores that have been underperforming, and it's Old Navy doing the heavy lifting, making up for Gap's lagging.

Barker: Yeah. It's very tough, year after year after year, to be right on the fashions. Chico's very much pointed out that their fashion choices -- I thought this was at least some small bit of something to hold on to from their report -- they spotted up the mistake that they made with the fashion. Didn't just blame it on market circumstances or anything. They said, "We overemphasized boho styles." I don't know, it's not my style, particularly, but I would say any emphasis is overemphasis there.

Hill: Boho?

Barker: Yeah.

Hill: Buy one half off? Is that what that is?

Barker: [laughs] Bold colors and original, artisanal prints. They were wrong on that.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Bill Barker has no position in any of the stocks mentioned. Chris Hill owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and Netflix. The Motley Fool has a disclosure policy.