Image placeholder title

Just a few years back,

Bombay Company

(BBA)

was a no-name retailer, peddling bulky, dark-wood furniture out of dimly lit, mall-based stores.

But times have changed.

Simply go to any one of its more than 400 locations nationwide and you'll see what I mean. The stores aren't nearly as cluttered as they used to be. There are more light wood, mainstream products on display. There's also a bevy of high margin, eye-catching items on its shelves from candles to glassware that puts many of those other mall-based knick-knack stores to shame.

Not surprisingly, Bombay's efforts to make its merchandise more attractive to the masses has led to improved foot traffic. In fact, same-store sales numbers, which had been down to the tune of 10% earlier this year, are improving, and are expected to turn positive in the second quarter. What's more, management has said publicly that, because of the above-mentioned changes, it expects total sales (for the fiscal year ending February 2003) to be in the range of $470 million to $474 million, which would be a healthy 7.4% improvement over fiscal 2002 results on the low end.

But that's not all.

In addition to its merchandise overhaul, there are a number of other metrics worth pointing out as well. For starters, Bombay has used advertising and special promotions to flush out the bulk of its slower-moving, old-line merchandise. As a result, total inventory levels are down by more than 12% from last year. It also has no long-term debt, trades under its tangible book value of $4.33 a share and -- value investors, are you listening? -- can be bought for just 0.32 times sales!

No matter how you slice it, that's darn cheap.

Proven Management

But what I really like about Bombay is its management team. Fact is, Bombay's VP Of Operations, Brian Priddy, and Carmie Mehrlander, its CEO, are top-notch managers. Priddy had previously been a merchandise manager at

Sears

(S) - Get Report

, helping put the "softer side" back into the company after it fell off-track back in the early/mid-'90s. Since coming to Bombay last year, Priddy has been instrumental in helping revamp the company's product line. Mehrlander is equally impressive, having been in the retail business for 25 years, and having served in executive positions at Sears,

Home Shopping Network

, and

Macy's

.

In short, these two know the retail business probably as well as, if not better than, any industry executive I've ever spoken with. And I'm extremely confident that they have what it takes to help the company carve out a viable niche for itself going forward.

With all that in mind, at 21 times fiscal 2003 earnings estimates of 20 cents per share, some value folks will still say that the stock isn't worth considering. But I beg to differ. That's because I think that the company's improving same-store numbers, coupled with its plan to increase its store base by 20 to 25 stores, or almost 5%, in fiscal 2003, will give it a tremendous amount of leverage over its fixed expenses going forward. As a result, I think the company is well-positioned to generate earnings growth in excess of 20% annually over the next five years, although not necessarily in a linear fashion, which is difficult to achieve in the retail sector. In my book, that kind of growth certainly warrants attention.

Based upon the company's growth rate and improving fundamentals alone, I think the stock could easily double from current levels over the next 12 to 24 months.

In keeping with TSC's editorial policy, Glenn Curtis doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to

Glenn.Curtis@realmoney.com.

Curtis is also the author of the TheStreet.com's, Era of Value -- a premium subscription newsletter containing Glenn's model value portfolio, in-depth analysis, specific value stock picks and investing recommendations.

Click here for a free two-week trial subscription to Era of Value.