Gymboree Corp.

Gymboree Corp (GYMB) is on fire after a solid quarterly report proceeded by excellent sales and earnings guidance.

Company Description

Gymboree is a retailer for high-quality childrens clothing and accessories. In addition to providing apparel for newborns to preteens, the company also offers parent and child development programs for kids 4 and under.

Fifth Consecutive Surprise

On May 20 the San Francisco-based corporation reported first-quarter results that included earnings per share of $0.74, compared to $0.86 in the same quarter last year. Sales dipped 5% over the past year to $230.9 million.

Matthew McCaule, Chairman and CEO, said, "Looking ahead, we do not anticipate the macro-environment to improve significantly in the near term, and will continue to focus on our ongoing strategies of acquiring new customers, expanding our store base and controlling expenses."

Estimates are Climbing

What makes Gymboree a growth candidate is the optimistic outlook by analysts. After the most recent report all 8 of the covering analysts revised earnings estimates higher.

The consensus estimate for fiscal 2010 is now $2.92, up from $2.69 prior to the release and from $2.08 over the past 3 months. Estimates for next year are averaging $3.20, 16 cents higher after the earnings announcement and up from $2.59 over the past 3 months.

These estimates forecast a 9% decrease in earnings this year and a 10% gain in the following year. However, the rapid earnings growth could continue and put the projections into positive growth before the year is over.

Great Fundamentals

In an industry that averages a profit margin of just 2.1%, Gymboree is maintaining a margin of 9.1%. The childrens retailer boasts a 28.7% return on equity, more than 3 times higher the norm for its peers. The company is currently debt free and 12.6 times forward earnings.

The Chart

Much of the results from the first-quarter report was absorbed by the market prior to the release. The huge gap highlighted below is the effect of updated sales and earnings guidance released in early April, which dampened the effects of the recent announcement.

Read the full analyst report on GYMB