(FORTUNE Magazine) – EDISON BROTHERS STORES Once largely a staid supplier of shoes and clothing to the fortysomething set, this St. Louis company has refashioned itself into the latest of the red-hot retailers. Its strategy was risky. Shopping malls from Paramus to Pasadena are haunted by the ghosts of those who have tried -- and failed -- to satisfy the unpredictable whims and desires of fashion-conscious teenagers and young adults. But for Edison Brothers, converting its best locations to trendy outlets like the Wild Pair, a high-tech shoe store, or Oak Tree and Jeans West, chains aimed at young men, has so far paid off. Just three years ago the company's best years seemed behind it. The shine was off the shoe business, then almost two-thirds of sales, and a foray into women's wear had flopped. Earnings had peaked at $46 million in 1983 and gone mostly downhill since. Sales were stalled under $1 billion. Enter a new management team led by Chairman Andrew Newman, a member of the founding Edison family, and President Martin Sneider, the first outsider to take such a high-level post. They quickly decided a costly restructuring was their best option. Says Newman: ''We had some significant divisions that were losing money and would continue to lose money. We chose to deal with those matters promptly.'' The duo's first step in the right direction was to shrink shoe operations and then move a number of the remaining stores into higher fashion. The new Wild Pair chain soon began delivering double-digit sales growth. But Newman and Sneider's best move has been to expand and revamp Edison's approach to apparel, which now accounts for about half of sales. Says Robert Buchanan, an analyst with the St. Louis investment firm A.G. Edwards & Sons: ''They've developed some nice niches in young men's clothing, where they don't face an abundance of top-flight competition.'' Profits also recovered fast because losing stores were turned around, not simply shut down. Though restructuring initially produced a loss of $21 million in 1987, last year the company earned $36 million on sales of $919 million. Julianne Iwersen-Niemann, an analyst with the St. Louis brokerage firm Stifel Nicolaus & Co., predicts Edison Brothers will be able to increase earnings as much as 20% a year over the next three to five years. The company's stock price has more than doubled from a year ago to $63 recently. Says Iwersen-Niemann: ''It deserves to be $85.'' As one of Edison's young customers might put it, truly radical.

BANCTEC INC. What's a sure-fire way to build share in a key market? Buy the competition. That's what this Dallas company did in January, when it purchased rival Computer Entry Systems of Maryland for $52 million. That deal gave BancTec a solid 40% to 50% of its two main markets -- making and servicing hardware and software used by banks to process checks and by utilities to handle remittances. BancTec's systems use a technology known as advanced optical character recognition to digitize, code, and process documents. The acquisition helped lift profits. For fiscal 1989, which ended in April, earnings rose 20% to $7.7 million on sales of $123.5 million, or $1.24 per share. Analyst Edward Gagnon of Volpe Covington & Welty, a San Francisco investment firm, thinks BancTec will net more than $2 a share by fiscal 1991. With demand in the U.S. rising only 5% to 10% a year, the company aims to maintain its rapid growth by selling more systems overseas. The stock recently traded at $18.50 per share, near a 52-week high.

RAUCH INDUSTRIES Christmas is definitely the season to be jolly for this Gastonia, North Carolina, company. Last year Rauch sold $32.7 million worth of glass and satin Christmas tree ornaments and other holiday decorations, and earned $1.9 million -- more than twice 1986 profits. The sources of this good cheer were a weaker dollar, which made imports more expensive, and fewer domestic competitors. That combination allowed Rauch to raise prices for the first time in five years. Despite its 6% price hike, the 37-year-old company, one of the largest U.S. producers of tree ornaments, was also able to increase unit sales. Rauch, which already makes Easter baskets, is entering the Halloween market. But not until next year. The stock, 61% of which is owned by the Rauch family, recently sold for $12.75 per share, close to a 52-week high. Binkley Shorts, a Boston fund manager whose Over-The-Counter Securities Fund invests in the thinly traded shares, expects further festivities. He thinks earnings could increase as much as 20% a year over the next five years.

PAXAR CORP. You probably don't know that most people, fully dressed, wear anywhere from 15 to 20 labels hidden in their garments. But Arthur Hershaft knows. He's chief executive of a company in Pearl River, New York, that produces the little tags and labels telling you where your shirt was made or whether to send your jacket to the dry cleaner. Formerly Packaging Systems Corp., Paxar changed its own label two years ago after Hershaft decided to concentrate on the business of identifying products. He sold off the packaging operations and bought two label companies. These days, making bar-code printers and supplies is Paxar's fastest-growing business. Last year slumping apparel sales and problems stitching new acquisitions together pushed earnings down 42% to $1.1 million on sales of $56.2 million. But in the first six months of 1989, profits rebounded to $3.3 million. Hershaft's goal: average earnings growth of 15% a year over the next five years. The stock recently traded at $10.88, 15 times trailing earnings.