When Walmart (NYSE: WMT) first started trading on the New York stock exchange in 1972, investors were reasonably impressed with the company’s slow and steady growth trajectory. But that was a lost decade of stocks, and the Arkansas-based retailer mostly flew under the radar. Ten years later, though, investors knew that they were looking at a growth stock with a very long runway. Shares rose nearly +1000% from 1983 to 1993, by which time the company had become a household name. Sales didn’t grow that fast, but a steady expansion in the price-to-earnings ratio (P/E) gave the stock its bright sheen.

While in search of the next +1000% retail gainer, investors should also seek out stocks that are somewhere along the continuum of that growth trajectory. They may already be somewhat established, but they also have ample room to further flesh out their retail concept. One of my favorite potential high-growth retailers is Citi Trends (Nasdaq: CTRN), which sells urban-focused apparel and footwear.

Citi Trends’ roots go back to Savannah in 1946. And for five decades, it was a fairly slow-growing enterprise. As recently as 2002, annual sales never topped $100 million. But since then, management has sought to put the company on a faster path to growth, opening new stores at a measured clip and adjusting the sales mix to boost revenues. Sales went on to grow at least +20% in every year through 2007. But in the last three years, a slowing economy pushed annual sales growth down into the +10% to +15% range. Not bad, but enough to push out the high-growth crowd of investors, which sent shares down from nearly $60 in 2006 to below $10 during the financial crisis.

Since then, shares have rebounded, but still trade for about half of that 2006 peak. More important, sales growth has begun to re-accelerate. In the fiscal first quarter ended April, sales rose an impressive +27%, thanks to a combination of 19 new stores and a +9.6% gain in stores that had been opened for at least a year. That performance came at a time when consumer spending remains very depressed. Just ask Walmart, whose quarterly same-store sales figures have been trending just above or below the 0% mark.

Results in the next few quarters should range between decent and spectacular. They’ll only be decent if same-store sales cool, offset by the fact that the company’s retail footprint is expanding by +15% this year. They’ll be spectacular if same store sales stay above 5% for the remainder of the current fiscal year. Right now, analysts are expecting Citi Trends to boost sales at least +20% in the current quarter that ends in a few weeks, and per-share profits should be handily above last year’s break-even results.

Then again, analysts have underestimated the company’s earnings strength for a number of quarters. That’s because Citi Trends, with more than 400 stores, has hit the retail sweet spot. Sales have reached a critical mass whereby the company’s merchandisers can secure better deals, bringing in more gross profits for the company. Gross margins have risen from 36.3% in fiscal (January) 2008 to 38.6% in fiscal 2010. In the most recent quarter, they were just shy of 40%. Rising margins are a big factor behind management’s prediction that per-share profits can hit $1.80 this year, an impressive +32% above last year’s results. In contrast, Walmart’s profits are expected to rise around +10% both this year and next.

Future years may not be as robust, but you can get a sense of where the numbers are headed. Modest improvements in same-store sales, coupled with a steady expansion in the number of stores, yielding better purchasing power, should keep the bottom line growing at a +15% or even +20% clip. Meanwhile shares are trading for less than 15 times next year’s profits. 

Action to Take –> Once investors begin to appreciate the recurring growth built into this business model, shares should start to trade at or above the earnings growth rate. And once the consumer picks up steam, investors will really warm to retail stocks like this. Could a trip back to $60 be in the cards in a few years for this name?