The weak economy has brought a silver lining: companies that were inefficiently operating were forced to take a hard look at their operations and address any shortcomings. And Christopher & Banks (NYSE: CBK) sure had many problems to tackle. The women’s clothing retailer did a poor job of managing store inventories, whether it was sending too many winter clothes to Florida stores, or poorly stocking dresses in the appropriate sizes. Moreover, the retailer didn’t bother testing new product lines before rolling them out to stores, so heavy markdowns to clear unsold goods became the norm.

That kind of sloppy management is acceptable in a solid economy: Christopher & Banks usually generated a respectable $40 to $60 million in annual net income throughout much of the last decade. The retailer has always had a solid reputation for conservative fashions for Baby Boomer women. But as the economy shrank, so did the company’s sales and profits. As Christopher & Banks’ fortunes started to decline, the Board installed a new CEO, Lorna Nagler, in August, 2007. Her plans to turn the retailer around were masked by a further slowing of the economy. But with the economy on the mend, the fruits of her labors are starting to show.

The turnaround plan relied on tried-and-true methods in the retail industry: A $15 million investment in technology now allows the company’s fashion buyers to better plan and allocate each season’s offerings, incorporating timely feedback on which fashions are testing well with focus groups. Christopher & Banks now much more accurately targets its list of six million potential customers with promotions and events that have already started to boost store traffic.

Yet the real key is to figure out how to boost sales volume at each store. The retailer has always operated a second store chain called C.J. Banks that caters to plus-size women. Now, many of the plus-size offerings are being featured in a store-within-a-store concept in some of the core Christopher Banks’ stores, leveraging on that brand’s larger 500 store base. In addition, management is now trying new concepts such as jewelry and scarves, and early results from that trial are yielding higher sales volumes and improved store-level profit margins.

Of course, these efforts have all come during a period of lousy retail sales. Same store sales fell -12% in fiscal 2009 and a whopping -23% in the first half of fiscal 2010. Sales fell at a slower pace in the fiscal third quarter ending November 2009, and are expected to turn positive in the first quarter of fiscal 2011 that began March 1. All told, annual sales will have likely dropped from $576 million in fiscal 2008 to about $450 million in fiscal 2009.

Notably, management has also trimmed about $20 million in operating expenses, even as it made the above-cited new investments, so the retailer should actually turn a decent profit even as sales remain weak. Yet in coming years, as sales start to modestly rebound, profit margins should expand at a rapid clip. Sterne Agee’s Margaret Whitfield thinks per share profits should rise from around $0.09 this fiscal year to $0.32 next year. And that assumes sales will grow only +3% to +4%. If sales grow at a similar pace to around $510 million the following year (which would still be well below the $576 million generated in fiscal 2008), per share profits could approach the $0.60 mark.

For some investors, a price/sales gauge may be easier to track, since profits will likely remain subpar in the coming quarters. Shares still trade for about 0.80 times sales, handily below the 1.10 average of the past five years. Just to get back to that historical level, shares could rise to around $11, a gain of about +37.5%. And if Nagler’s efforts gain real traction, shares may start to make a move a good deal higher. This stock fetched $30 just three to four years ago. Investors would be pleased to see shares rise to just half of that former peak.