Talking about Gymboree
Banking on a "negative mid-single-digits" dip in comps for the month in May -- and a slide in "negative low single digits" for the quarter as a whole -- that dark cloud threatened to rain on the parade of a retailer that was improving financially yet seemingly struggling with its popularity.
Well, skies have a funny way of clearing. That was evident when the company announced that same-store sales fell by just 2% in May. That certainly wasn't "mid" anything. June saw another decrease in sales at the store level, but then July bounced back brilliantly with a 12% surge.
Investors have a right to be suspicious when a company is able to produce such dramatic differences in volume. Unfortunately, last month's spike came from the bargain hunters who flocked to the chain's sales. Trading in one dark cloud for another, Gymboree licked its popularity problem, but it paid for it through discounted wares with weaker gross margins.
That finds the same company that was hiking its outlook three months ago talking it back down. Gymboree now expects to earn between $0.90 and $0.94 a share this year. It is also realizing that its flagship stores haven't fared so well across the Atlantic. The company will be shutting down its stores in England and Ireland later this year.
Children's clothing can be a fantastic business. Those knee-high kids have growing bones that demand perpetual wardrobe updates. Gymboree's rivals such as Children's Place
Gymboree also has its active play centers that have a funny way of drawing in parents who think that a floating parachute is the appropriate elixir to most child development ills. Then again, Gymboree can probably use those parachutes given the ups and downs the company has been through lately.Have you ever been to a Gymboree play center? Was it worth it? What are some of the unique characteristics of the relationship between a parent and a child that go beyond parachute time? Does mother really know best? All this and more in the Mothers and Daughters discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz has been seen at a Gymboree store once or twice. He does not own shares in any companies mentioned in this story.
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