Shares of West Coast regional department store retailer Gottschalks
Q3 revenues rose 1.4% year over year to about $148 million as same-store sales growth of 1.8% drove the numbers up even though the company has fewer stores than it did a year ago. A 100th anniversary promotion helped drive business; good merchandising led to better inventory figures and gross margins. Refinanced debt, meanwhile, cut interest expense in both dollar and percentage terms. All in all, while Gottschalks still lost money in the first nine months of the year, net losses narrowed substantially.
Lost money? Don't fret. In the department store business, if the holiday quarter isn't everything it's darn close. (Don't believe me? Then you don't remember how much "fun" it will be to hit the malls later this week and for the next few months.) Department stores aren't what they used to be, but for many people and many communities they're still largely synonymous with Christmas shopping -- they can thank Federated Stores'
Gottschalks' management isn't working to make the company into much more than it is: A purposefully run, profitable, financially healthy cash generator with a strong position in a well-defined geographic. What's this mean for investors? Well, they think they can parlay that into 50% earnings growth next year -- even with revenue and "comps" growth in the low single digits. With the company's shares currently trading at 20 times this year's guidance, it's plain to see why folks are buying in.
Fool contributor Dave Marino-Nachison doesn't own any of the companies in this story.