Never heard of CitiTrends (NASDAQ:CTRN)? Maybe it's time you get acquainted. After all, a stock that has risen 27% in the last year is one that bears at least some attention.

Citi Trends' third-quarter earnings increased 6.7% to $2.8 million, or $0.20 per share, soundly beating analysts' expectations. Sales increased an impressive 24.6% to $87.1 million. Same-store sales increased 6.2%, up against a tough comparison this time last year, when comps increased by 25%. In good news for Citi Trends' shareholders, the company increased 2006 earnings guidance to $1.43 to $1.47 per share, with expected comps growth of 7% to 9%. It also gave fiscal 2007 guidance for earnings of $1.73 to $1.77 per share, with comps growth of 3% to 4%.

There's a lot to like about the quarter, although Citi Trends' third-quarter inventory increased 38%, outpacing sales growth, which is always something to keep an eye on since burgeoning inventories can lead to later markdowns. The company also said that starting in the first quarter of fiscal 2007, it will no longer report sales on a monthly basis, instead sticking to a quarterly schedule. (That appears to be a growing trend, but one that I said earlier this year isn't a particularly good one for retail investors like us.)

Citi Trends has only been publicly traded since May 2005. It provides low-priced urban clothing that particularly targets the African-American demographic, and in its Form 10-K it describes its strategy of providing recognized brand-name clothing at prices 20% to 60% lower than in department and specialty stores. Competitors include Ross (NASDAQ:ROST), TJX Companies' (NYSE:TJX) discount stores, Sears Holdings' (NASDAQ:SHLD) K-Mart, and Wal-Mart (NYSE:WMT).

Although Citi Trends competes with off-price retailers, it tries to provide a shopping environment that feels more like a specialty store to its customers. And it says it has a highly profitable model because it places its stores in busy districts that are convenient to low- and moderate-income neighborhoods, and targets previously occupied sites in order to get reasonable rents.

Citi Trends does look like a classic growth story, and some investors seem to be treating it that way judging by the stock's appreciation this year. (On the other hand, maybe it's not on too many people's radars yet -- it's only been rated 37 times in our CAPS database, with the majority of players believing it will outperform.) Citi Trends is trading at 26 times fiscal 2007 earnings, a bit higher than its expected 20% increase in earnings per share for that time frame. Meanwhile, the fact that Citi Trends only had 266 stores at quarter's end is yet another argument for future growth.

Although the stock is in pricey territory -- and the company hasn't been public for all that long -- Citi Trends is certainly an interesting stock to keep an eye on.

Read up a little more on retail:

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Alyce Lomax does not own shares of any of the companies mentioned.