The rally has put shareholders in positive territory over the past 52 weeks, trouncing clothing retailers like Macy's (NYSE:M) and Gap (NYSE:GPS), which are at multiyear lows. The stock has even outperformed high-flying Under Armour (NYSE:UAA) lately.
So what: Revenue growth has been the main driver of that outperformance. Comparable-store sales, which include Lululemon's online business, grew 6% to start off the company's fiscal 2016 after spiking by 11% in the prior quarter. Focusing only on the physical stores, the numbers drop, but remain healthy. The retailer logged 3% higher comps last quarter as Macy's and Gap each posted 5% declines. Under Armour's gains are leading the market: Sales rose 30% in the most recent quarter.
Lululemon has had to give up some profitability to keep its customer traffic churning along, though. Gross profit slipped to 47% of sales from 48% a year ago, continuing a disappointing five-year trend that has seen its margin plunge from a 2011 high of 57% of sales.
Now what: CEO Laurent Potdevin and his executive team have forecast more of the same for the year ahead. Sales growth should be powered by solid comps in the "mid-single digits," according to their latest projection. Profits are tracking below consensus estimates, however. Lululemon sees EPS of $2.10 per share, for an 11% improvement over the prior year.
That would mark exactly the same growth pace the retailer managed last year. Sure, investors would prefer higher profits. But it's encouraging that the company is seeing unusually strong customer traffic trends right now. If management can keep that momentum going, faster earnings growth can't be far off.