Why do so many investors, be they marketing executives at software companies or retirees from big Dow companies, work so hard to make their lives more complicated? I mean, look at some of the nanotech, fuel cell, and biotech garbage stocks that generate so much volume. How many investors really understand the technology, the markets, the obstacles, and the opportunities? Let me put it this way: if Ph.D's in the related fields walk away scratching their heads and shrugging, what are John Q. Investor's odds?
And then you have an idea like Chico's (NYSE:CHS). The concept? Sell attractive clothes to an underserved but relatively affluent market (adult professional women), and source a lot of your goods from cheap overseas suppliers. Sounds simple and profitable. And it is.
Sales were up 33% in the recent quarter, as comp-store sales lingered in the double-digit zone at 16%. While the mainline Chico's brand continues to perform well, the newer White House Black Market (WHBM) concept grew its top line by about 100%. Like I've said before, there aren't any fancy tricks here -- just good merchandise aimed at a market with limited attractive alternative destinations.
Based on the strength of the WHBM concept, the company is accelerating its launch plans for new stores. On the other hand, the lingerie-oriented Soma brand is proving to be a bit more challenging. Performance isn't bad, mind you, but the company seems to be realizing that there's a reason there are few rivals to Limited's (NYSE:LTD) Victoria's Secret: This is a tough business.
Whatever the issues with Soma, I have confidence that management will figure it out. Likewise, I still believe there's plenty of room to run with the Chico's and WHBM brands.
That said, this is a tough stock to recommend for purchase, when you consider that valuations make it look as though Chico's is priced for near perfection. Granted, the company's been living up to those expectations, but I'd prefer a little more wiggle room before investing my own money.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
