Lululemon Athletica Holds Strong Pose Even In Volatile Market

Lululemon Athletica (LULU), which jumped more than 4% Wednesday, had its best-ever Q1 this year when its earnings tripled from the previous year. Analyst projections were for $0.21 earnings per share, and actual earnings beat this by a healthy margin for $0.27 per share.

Lululemon has raised revenue projections for the rest of 2010 by about 20%. LULU currently operates around 100 stores across North America, so there’s plenty of room for growth with this company, whose customers are women who participate in yoga and other sports.

Clothing retailers have done well lately, even in the poor economy. I’ve always thought that companies like Abercrombie & Fitch (AF), Urban Outfitters (URBN), and Aeropostale (ARO) were great businesses. They market to a great demographic for clothing sales. I just turned thirty years old; I wear a pair of $20 khakis and a 5-year old Polo shirt to work. For shoes, I wear whatever makes my feet feel best after a day of walking. I haven’t worn a pair of skinny jeans since the ’80s. I’m not the targeted demographic for clothing retailers.

They’re looking for buyers in the teen and tween market. You wouldn’t believe the price that people pay for trendy clothes, like $200 pairs of blue jeans. These companies have created a great business for themselves. Kids beg parents for trendy logos for Christmas, and many parents are obliging. Teens and tweens with their first real job are feeling what it’s like to have money in their pocket and nothing to spend it on, and they’re going out and buying $1000 worth of clothes and charging it to a credit card.

This kind of spending may not be good for their personal finances, and being saddled with debt might make these young folks seriously reevaluate their spending habits in the future, but that’s not our concern.

These clothing retailers are examples of stocks performing spectacularly well in a very volatile market, and they have a lot of room to grow.

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