The Hottest Retailer in 2011

We may be just a few trading days into the new year, but it's going to be hard to find a hotter bricks-and-mortar retailer than lululemon athletica (Nasdaq: LULU  ) .

Shares opened higher this morning after the company raised its already-aggressive guidance for its fiscal fourth quarter, which will end later this month.

lululemon, an upscale yoga gear specialist, is now targeting a profit per share of $0.55 to $0.57. It earned $0.40 a share during its previous holiday quarter, and just last month management was telling investors to expect no more than $0.48 a share on the bottom line.

This isn't just a matter of margins stretching like some of its customers on a yoga mat. Sales are booming, with lululemon expecting net revenue of $237 million to $239 million. This is a far cry from the $210 million to $215 million it had originally forecast. Same-store sales are now expected to climb in percentages in the mid- to upper-20s.

I'll give your jaw a few seconds to pick itself up off the floor.

Got it? See if it drops again when I point out that comps actually rose 29% during last year's holiday quarter. This isn't just a company bouncing back from a sandbagged quarter. This is, quite frankly, the hottest retailer that you can buy these days.

It gets better.

The Canadian company has been trouncing Wall Street expectations over the past year, so even last night's guidance may be underselling the juicy truth.

Let's go over the past four quarters.

Quarter

EPS

Estimate

Difference

Q4 2009 $0.40 $0.29 38%
Q1 2010 $0.27 $0.21 29%
Q2 2010 $0.30 $0.24 25%
Q3 2010 $0.36 $0.25 44%

Source: Thomson Reuters.

Selling expensive fitness apparel is a sweet gig during an economic recovery if you're pushing a hot brand. Under Armour (NYSE: UA  ) has also blown past the pros in each of the past four quarters. Nike (NYSE: NKE  ) is three out of four, and simply met guesstimates during the other quarter. Ritzy handbag maker Vera Bradley (NYSE: VRA  ) has more than doubled since going public three months ago.

The love for big-ticket apparel isn't universal, though. Designer denim has had it rough. True Religion (Nasdaq: TRLG  ) has missed Wall Street's profit targets in each of the two previous quarters, and Joe's Jeans (Nasdaq: JOEZ  ) is trading for less than half of its 52-week high. In other words, investors need to be as choosy with their stocks as well-to-do shoppers are with their purchases.

Do you know a hotter retailer? Prove it! Top lululemon in the comments box below.

lululemon athletica and Under Armour are Motley Fool Rule Breakers picks. Nike is a Motley Fool Stock Advisor recommendation. Under Armour is a Motley Fool Hidden Gems pick. The Fool owns shares of Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz doesn't think he's cut out for yoga, given his inabilities to relax and focus. He even lacks the patience for yoga through Wii Fit. He does not own shares in any of the stocks in this story. He is also part of the Rule Breakers research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On January 12, 2011, at 3:28 PM, debshirle wrote:

    I love LULU lemon stock. It's been one hell of a ride after my friends sold it and I hung on for the ride. I knew there was more to this spandex than just a small stretch. Yoga forever and LULU too.

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