There is little not to like about the numbers that clothier JoS. A. Bank (NASDAQ:JOSB) put out yesterday. In the first quarter, JoS. A. Bank (Joe to its friends) increased sales by 28% over the first quarter of 2003. Earnings more than doubled to a whopping $0.47 per share. And the company upped its earnings guidance for the rest of the year. JoS. A. Bank now expects to increase earnings 40% over fiscal 2003 and sew up profits of $23.3 million.

In its earnings release, the company gleefully announced that, if the 2004 numbers pan out, it would have a "five year average annual compounded net income growth rate of approximately 75%, with each year increasing no less than 30%." JoS. A. Bank, based in Hampstead, Md., also reiterated plans to continue its bricks-and-mortar expansion by opening 55 to 65 new stores this year.

That decision seems debatable. True, the company's same-store sales for the quarter increased an impressive 13.6% -- nearly twice the 7% increases found at both Federated Department Stores (NYSE:FD) and Gap (NYSE:GPS), and even better than the already-impressive 12.1% sported by its direct competitor, Men's Wearhouse (NYSE:MW). Such success argues in favor of opening even more stores. Still, setting up bricks-and-mortar operations costs money, and JoS. A. Bank is already earning better margins and experiencing greater growth in its catalog and Internet businesses (up 18.7% year on year). So you have to wonder whether opening new stores is really the move that will serve shareholders best.

And another thing. The company increased its sales by 28%, right? But while total inventory growth was roughly in line with that, inventories of finished goods increased much faster, by 44%. Perhaps the extra suits and ties are needed to stock all the new stores. Perhaps. But this is a development that bears watching.

Finally, let's look at free cash flow, an item that Motley Fool Hidden Gems investors try to focus on when evaluating small caps such as JoS. A. Bank. Truly profitable companies should generate excess cash, and their cash hoards should increase year over year. JoS. A. Bank, however, has negative free cash flow, and its cash and cash equivalents have declined 33% over the past year. Admittedly, this too probably arises from the costs of opening all those new stores. But this Fool, at least, is leery of investing in small caps that -- however profitable they are on paper -- do not generate free cash flow.

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Although Fool contributor Rich Smith buys all his suits at JoS. A. Bank (yes, really), he owns no shares in any of the companies mentioned here.