While leading plus-sized women's apparel retailer Charming Shoppes (NASDAQ:CHRS) didn't finish the summer strong following some downbeat same-store sales numbers, its shares continued their nearly four-month hot streak by adding almost 7% on fiscal Q3 (ended Oct. 30) financial results.

Revenues rose 2% to $542 million -- not a huge jump, and neither was the 1% rise in same-store sales. Those numbers, however, should be taken with a grain of salt. The company actually has fewer stores than it did a year ago. Substantial decreases in cost of goods sold (in real dollars and as a percentage of sales) improved gross margins, which in turn helped drive broader operating margins even as expenses rose.

All that meant a huge increase in net margins -- and, in the end, a very significant jump in net income: It popped 226% year over year to above $7 million, leading to big EPS gains despite an increased share count.

What appears to be driving the growth is improved performance at former Limited (NYSE:LTD) operation Lane Bryant, which hurt the company in the first half. Acquired in 2001, it's a good portion of Charming Shoppes' store count and revenue base and is meant to be a key part of its growth strategy. Trouble is, it hasn't performed in recent periods.

Quality, fit, and inventory problems all conspired, for example, to hurt margins in late 2003 and early this year as the company had to dump duds at cut-rate prices. But yesterday the company said Lane Bryant was behind most of its improvement in Q3, suggesting good positioning for the holidays.

Some upbeat recent monthly sales reports were what led investors to get on board early. Investors have reason to like this company's position in its marketplace -- even more so if it gets better performance from its recently troubling division.

Fool contributor Dave Marino-Nachison doesn't own Limited or Charming Shoppes.