Are you looking for a retailer posting strong same-store sales increases that are well above analyst estimates? Look no further than Gymboree
In June, analysts expected a 3% year-over-year increase in same-store sales. Gymboree posted a 17% gain. Then in July, while gloomy analysts were looking for a decline from the company, same-store sales actually rose 10%. For the quarter (which includes June and July), Gymboree posted a 9% gain in comps.
Sending the stock up by more than 15% in midday trading Thursday -- making the stock one of the largest percentage gainers on the Nasdaq for the day -- is news that same-store sales for September spurted 10%. And, you guessed it, analysts missed it again. They thought, on average, that comps would rise by less than 1%.
To understand the underlying reasons for analysts' bearishness, we need to look back to Gymboree's critical fourth quarter last year and its first quarter this year -- periods during which the company failed to meet estimates. For that matter, the company reported a 1% decline in same-store sales for just this past August. And it didn't post a profit in the current quarter.
So, all of the recent growth has not been straight up, and to be fair, first-quarter comps growth of 2% was hardly a harbinger of the double-digit-percentage increases to come.
What is surprising is that a much larger competitor, Children's Place
The silver lining and final surprise in today's Gymboree press release was earnings. While the company had previously guided investors toward earnings of about $0.60 this year, the company now sees earnings in the range of $0.62 to $0.68 a share. At the high end, the stock is priced at 23.5 times forward earnings. That's a reasonable price, but it's not what I'd call value-priced, for a stock that analysts expect to grow earnings by 18% annually for the next five years.
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