Lululemon (NASDAQ:LULU) reported second quarter results that easily make it one of the best retailers out there right now. In a time when many are struggling, Lululemon continued its sales growth, with strong expansion in direct to consumer, as well as continued strength in comparable store sales. Net income grew 30% to $124.99 million.

A great quarter

Revenues increased 22% year over year to $883 million. Lululemon probably has the best comp sales trends in retail right now. Same store sales increased 10% in the quarter, while the ever growing direct to consumer segment increased a whopping 30%. The company noted that direct to consumer revenues now makes up 24.6% of the total revenue mix. In all, total comparable store sales increased 15%. It's worth noting that sales increased 17% on a constant dollar basis.

Sales are strong in multiple segments, as women's clothing continued its performance with its men's business growing 35%. 

The company's gross margins and operating income are exceptional. Gross profits increased 23% to $485.8 million, while margins were 55%. Operating income increased 25% to $168 million. The margins on that operating income increased by 50 basis points year over year to 19%. With net income growing to $124.99 million, earnings were $0.96 per diluted share. That's a 35.2% increase over last year's $0.71 per diluted share.

Model running

Image Source: Lululemon Athletica

Continued strength ahead

Overall, I simply don't have anything bad to say about Lululemon's second quarter. They crushed it. Looking ahead, the company seems to believe things will continue in a positive manner. Third quarter guidance includes revenues of $880 million to $890 million. Total comparable sales are again expected to grow in the double digits, while earnings are expected to be $0.90 to $0.92 per diluted share; a strong year over year increase from 2018's $0.71 per diluted share. For the full year, the company is forecasting double digit comp store sales growth, coupled with earnings of $4.63 to $4.70 per diluted share. This is again a large gain from 2018's earnings of $3.61 per diluted share.

Opening at record highs today, Lululemon has remained one of the strongest stocks you could own over the past few years. Drastically outpacing the S&P 500 right now, The athleisure company is seemingly untouchable. In the past, I've been critical of the stock's valuation. Full year guidance suggests a forward P/E ratio of around 40x full year earnings.

I don't like big premiums, but when you consider how strong Lululemon's results have been, it's easy to see why investors are flocking to the strongest name in clothing retail. I don't know whether it's the power of branding, or if the competition doesn't stack up in terms of quality, but Lululemon seems to have a real edge in the marketplace. I used to believe that this market of athletic clothing was oversaturated, but as names like Under Armour (NYSE:UAA) experience difficulty, it is clear that management at Lululemon knows what they're doing.

Based simply on valuation, I cannot rate Lululemon a "buy". I consider the stock a strong "hold", as guidance implies the money train isn't stopping this year. If you were wise enough to stay in this thing, you're reaping the rewards. However, it seems a bit aggressive to chase it.