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Here's What Lululemon Is Doing Right and What Drove the Impressive Quarter

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Investors gave credence to LuluLemon's (LULU) - Get lululemon athletica inc. 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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