By Lawrence Meyers

Retail is a dangerous business -- a fickle one. Consumer tastes can change on a dime.  

Companies like Chico's FAS (CHS) and Christopher & Banks (CBK) have been victims of exactly such whimsical desires. That's why companies like The Buckle (BKE) should be admired, because they have figured out there are certain staples consumers look for -- and if you offer some diversity among those staples, you can have a business that isn't as risky.

Likewise, you could go the route of Target (TGT) and just offer everything, but that has its own problems in a tough economy.

That's also why Ascena Retail Group (ASNA) and Francesca's (FRAN) should be admired ... and considered as possible additions to your portfolio. Here's why:

Ascena

Ascena is a specialty apparel retailer for women and tween girls in North America that also operates as Dressbarn, Maurices and Justice.

Dressbarn and Maurices stores offer both casual and career apparel and accessories, while Justice offers an array of products primarily for tween girls, ranging from apparel to footwear to bedroom furnishings.

One of the reasons I believe Ascena has maintained a consistent record is because it relies on clothing that isn't as susceptible to fashion swings and caters to a demographic more concerned with price than trends.

Ascena has been delivering solid earnings results, and its most recent quarter was no exception. Earnings for continuing operations were up 20% to $63 million on a massive increase in revenue of $370 million, some of it coming from the recent acquisition of Charming Shoppes. Gross margins broke higher as well, up from 57.2% to 59.4%.

The company has previously operated without debt, but took on some to fund the Charming acquisition. Still, Ascena now sits on $137 million in cash and only $305 million in debt.

Ascena forecasts between $1.45 and $1.55 per share in full-year 2013 earnings, which is an 11% to 15% growth rate. Long-term growth also is pegged at 15%. ASNA trades at 12 times earnings, so it is right in that growth range, meaning it's a solid growth play.

Francesca's

Francesca's also plays around in the female retail space, and does sell apparel, but also sells jewelry, accessories and gifts for women across 327 boutique stores in 43 states. It's also in the midst of an explosive expansion at a time when most other retailers are happy to see any positive number in their same-store comps. Q3 sales increased 44%, and same-store comps increased -- are you ready? -- a stunning 16.7%.

Diluted EPS increased 71%, gross profit jumped up 96 basis points to 52.61%, and so far this year, net sales are up an amazing 47%. Francesca's also has no debt and $13 million in cash, and has generated about $16 million in free cash flow so far this year.

Whatever magic sauce Francesca has for its boutiques, it's working.

FRAN stock soared right after the report, jumping 11%, but has since given it all back -- and more. The company is looking at $1 in EPS this year and trades at 22 times estimates. So investors have a great high-growth story here, but one where valuation may come into play. The 52-week high for the stock was $37, however, and the stock has received a 40% haircut since then.

Is it time to buy? Has the stock fallen enough? Well, two directors purchased a total of 30,000 shares in September at $28.37 and $29.01. In fact, more than 20% of the company is owned by insiders.

I think Francesca's is a buy for your growth portion of your portfolio ... but be ready to bail if growth flags.

As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Capital, Inc., which brokers secure high-yield investments to the general public and private equity. You can read his stock market commentary at SeekingAlpha.com. He also has written two books and blogs about public policy, journalistic integrity, popular culture and world affairs. 

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