Stocks drifted mostly sideways in a low-volume, pre-holiday session Friday. The Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) closed nearly flat, but posted gains for the month of August.

Today's stock market

Index Percentage Change Point Change
Dow (0.09%) (22.10)
S&P 500 0.01% 0.39

Data source: Yahoo! Finance.

Retail stocks had a good day, with the SPDR S&P Retail ETF (NYSEMKT:XRT) adding 1.3%. Energy was the weakest sector; the Energy Select Sector SPDR ETF (NYSEMKT:XLE) lost 0.8%. 

As for individual stocks, lululemon athletica (NASDAQ:LULU) stunned investors with strong growth and Zuora (NYSE:ZUO) fell despite reporting a good quarter.

City street at night with stock price display.

Image source: Getty Images.

No lie: Lululemon's pants are on fire

Lululemon Athletica dazzled investors with strong sales and profit growth as traffic in stores accelerated and online sales took a big jump. Net revenue increased 24.5% to $723.5 million and earnings per share grew 82% to $0.71. The results exceeded the company's guidance from three months ago of sales between $660 million and $665 million and EPS of $0.46 to $0.48. Investors sent shares up 13.1%.

Total comparable sales increased 19% in constant currency, with comparable sales in Lululemon's physical stores growing 10% and online sales jumping 48%, contributing 23% of total revenue. 

Gross margin widened by 3.2 percentage points to 54.8%, exceeding the company's expectations. Women's pants, which is Lululemon's highest-margin category, and men's pants both had comparable-sales increases of over 30%. The company also had lower product costs and lower markdowns than in Q2 last year.

Lululemon sees the sales momentum continuing into Q3, and raised its full-year revenue guidance by 5% at the midpoint to a range of $3.185 billion to $3.235 billion, based on a comparable-sales increase in the low teens. EPS guidance was raised 11% to between $3.45 and $3.53.

It's not a stretch to say Lululemon made itself one of the retail stars of this earnings season, and gave investors reasons to expect more of the same in future quarters.

Zuora falls despite solid results

Shares of Zuora, seller of cloud-based subscription management software for businesses, plunged 18.9% after the company reported better-than-expected results from its second quarter as a public company. Revenue grew 47% to $57.8 million on a 44% increase in subscription revenue. Non-GAAP net loss widened to $13.7 million, or $0.13 per share. The results beat the analyst consensus for a loss of $0.16 per share on revenue of $54.1 million.

Zuora added 33 customers with annual contract value (ACV) over $100,000 for a total of 474, a 7% increase from last quarter. The dollar-based retention rate, which is a measure of how the ACV of customers who have had contracts with Zuora for at least a year has changed from the prior year, was 112%, at the top of Zuora's expectations, indicating that the company is having success in upselling to its customer base.

Looking forward, Zuora expects Q3 revenue of between $58.3 million and $59.3 million, above the analyst consensus of $56.1 million, and non-GAAP loss per share of $0.14 to $0.13, which is a bit worse than expectations of a $0.12 loss. For the full year, Zuora raised revenue guidance 3.2% at the midpoint to a range of $227 million to $230 million. Guidance for a per-share loss between $0.59 and $0.61 is in line with analyst expectations.

The results were good and guidance is close to published estimates, but with the stock of the fast-growing company in the hot software-as-a-service market trading for more than double the IPO price, investors decided to take some bets off the table.