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Jacob Sonenshine: What Lululemon is doing right.

Jacob Sonenshine: Let's get to the news first. Lulu beat on earnings. They beat on revenue comp sales and earnings raised full year guidance at the high end, $4 70 cents a share. Now two things are doing really, really right. One, they're meeting the customer where the customer is and where the customers mind is. They're not just expanding stores, which they're doing very rapidly, but it's not just that, so 15% comp sales, so not revenue total with all the stores, but 15% comparable sales beat estimates about 12% that was driven by you think this is just a ladies' brand that was driven by men's wear. 27% a plus in the quarter for men's wear. Women's was 13%. Lulu has something called OTC, that's not media, that is office, travel, commute. It tells you they are thinking about where the customer is, where the customer's mind is, and literally where the customers throughout the day. E-commerce also up 31%, not every retailer that's going for e-commerce as good at it. Lulu has been very, very good at it. Growing e-commerce, 31% year over year. Second thing, Lulu is doing very well, execution and efficiency. They're looking for flat to higher gross margins in there. That's reflected in their eps guidance, and that's accounting for tariffs. So pretty good cost management there. But on down the income statement, SGNA expense came in lower than expected as well. So very good execution in the face of tariffs there.

Jacob Sonenshine: So, two things Lulu is doing very well.

Investors gave credence to LuluLemon's (LULU - Get Report) efforts that drove a solid quarterly earnings report out Thursday afternoon. 

The shares rose in post market trading Thursday, and were up 5.73% to $199.20 Friday morning. 

GAAP earnings per share for the second quarter came in at 96 cents, beating Wall Street estimates of 89 cents. Sales were $883.4 million, beating analysts' expectations of $846 million. Sales grew 22% year over year. Same-store-sales growth was 15%, beating estimates of 12.2%. 

Management guided for full-year 2019 revenue to range $3.8 billion to $3.84 billion, up from a previous expected range of $3.73 billion to $3.77 billion. Earnings are seen between $4.63 and $4.70 a share, up from a previous range of $4.51 to $4.58.

Here's what Lulu is doing so well. 

Meeting the Customer Where He/She Is

Lulu's initiatives show it is meeting not just female customers, but now also the men, where they are. 

The men's category rose 27% year-over-year, while the women's category rose 13%. Lulu has long branded itself towards women broadly, but are now showing the ability to capture men in the trendy 'athleisure" category. Wedbush Securities analyst Jen Redding mentioned in a note Friday morning that Lulu has an "OTC," or "office, travel, commute" initiative, highlighting that management is thinking along with its customer and where those customers are throughout the day and how to deliver products to them. 

E-commerce sales rising 31% year-over-year didn't hurt either, further highlighting the company's ability to meet the customer online, an art many struggling retailers are unable to master with consistency. 

Lulu isn't seen by some as a growth stock merely because of its rapid store expansion. The high (and better-than-expected) comparable store sales growth rates are contributing to what Redding sees as a justifiable "premium valuation." Lulu currently trades at 34 times one-year forward earnings. 

Execution & Efficiency

Already reflected in management's earnings guidance are higher costs from tariffs. And still, the company expects gross margins to be flat to slightly higher year-over-year in the next year. 

Meanwhile, selling, general and administrative expense beat expectations for the quarter. The cost controls are one part -- next to higher prices -- of the equation that is keeping operating margins in shape for the retailer. 

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