Are you looking for a retailer posting strong same-store sales increases that are well above analyst estimates? Look no further than Gymboree (NASDAQ:GYMB), the specialty clothing retailer for women and children. But make sure you also look beyond the comps, because not everything is quite as good as it looks.
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 (NASDAQ:PLCE), just reported a 2% increase in September same-store sales. That was slightly below what analysts had expected. So in its segment, sales are not booming for everyone.
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.
Are you looking for great companies? Let Motley Fool co-founders David and Tom Gardner find the next big winner for you. Subscribe to the Motley Fool Stock Advisor newsletter today.
Fool contributor W.D. Crotty does not own shares in any of the companies mentioned. Click here to see The Motley Fool's disclosure policy.
