If you bought stock in specialty retailer Genesco (NYSE:GCO) at the end of 2000 and still held it today, your paper profit to date would be somewhere in the vicinity of 50%. If you bought the stock on April 1, 2004, your paper profit would be 58%. So why am I mentioning this?

Retailers that have been in existence for a while tend to experience lulls in their growth patterns. It's not that they've lost their way, but rather that others have simply presented better options to the consumer. Usually, what jolts a company out of its lethargy (at least temporarily) is an acquisition of a younger, more aggressive business, one that is growing by leaps and bounds.

In Genesco's case, it was the April 1, 2004, acquisition of Hat World. The Indianapolis-based company was founded by two retail veterans who perceived an unfilled need for a store that sold nothing but ball caps. Mall owners thought it was the craziest idea they'd ever heard, but in the first quarter, Hat World contributed 22% of Genesco's total sales and 41% of the pre-tax profits. Great numbers for sure, but it's the 7% same-store sales growth that will solidify Genesco's future.

The company's straightforward plan is based on five points: increasing the number of stores, expanding total retail square footage across all segments, improving same-store sales, enhancing operating margins, and increasing the value of each of its brands.

Further examination of the latest quarterly report reveals telling information about the company's progress in meeting those goals. Genesco has five divisions -- Hat World, and four footwear-related segments: Journeys, Underground Station, Johnson & Murphy's, and Licensed Brands. They all are retailers with the exception of the Licensed Brands segment, which sells wholesale to other businesses.

Each division had positive sales growth except for Licensed Brands, which accounts for less than 5% of the total revenue. Overall, sales grew by 27%, earnings per share by 33%, and operating margins from 5% to 5.6%. The number of open stores jumped from 1,500 to 1,639, and same-store sales increased for all four retail brands.

The plan seems to be working well. But does this mean you should buy the stock?

In my opinion? Yes. When compared with its apparel-store peers, it currently trades at a price-to-earnings, price-to-sales, and price-to-book ratio less than the industry average. But that's not what makes it a buy.

Think of it this way. If current results are in any way indicative of future patterns, the Hat World acquisition should continue to provide growth opportunities for Genesco.

Will Ashworth lives in the Great White North. He does not own the stock mentioned but does welcome your comments at washworth@sympatico.ca.