Despite supply-chain challenges that have been plaguing most other retail businesses over the past year, Lululemon (LULU -1.46%) continues thriving. The booming apparel brand registered year-over-year revenue growth of 42% in fiscal 2021 (ended Jan. 31), while operating income surged 63%. 

This strong performance, which happened during an otherwise difficult macroeconomic environment, supports the argument that investors should seriously consider buying this top growth stock. 

Two people exercising and doing lunges in the park.

Image source: Getty Images.

Performing at a high level

Congested supply chains, soaring inflation, and the negative impact of the coronavirus omicron variant weren't enough to slow down this unstoppable apparel business. In the most recent fiscal quarter, Lululemon's same-store sales jumped 32%, and diluted earnings per share (EPS) increased 33.3%, compared to the prior-year period. What's impressive is that even with rising input costs, Lululemon's operating margin expanded in the quarter to 27.7%. 

The business opened 53 net new company-owned stores last fiscal year, bringing the total to 574. And of the 70 new locations planned for this year, 40 will be in international markets. 

"We are entering the new year from a position of strength, which we'll build upon to continue delivering for our guests and shareholders in the years to come," CEO Calvin McDonald mentioned in the earnings press release. 

He also highlighted four key tailwinds that are propelling the business right now:

  • Remarkable growth in athletic apparel
  • The importance of consumers having versatile clothing for both exercising and lifestyle purposes
  • The need for retailers to provide a seamless omnichannel shopping experience
  • The general public's heightened interest in physical, mental, and social well-being

Lululemon will continue to benefit from these major trends. 

Leaning on product innovation 

Looking ahead, the leadership team expects sales and diluted EPS in fiscal 2022 to increase 21% and 23%, respectively, year over year. Both beat Wall Street's consensus forecast, sending shares 10% higher the day following the news. 

Lululemon will lean heavily on its culture of innovation to support growth going forward. For example, the company is launching tennis and golf collections. And it just released its first women's shoe (of four this year), the Blissfeel, to an initial response that exceeded management's expectations. Lululemon will introduce men's footwear sometime in 2023. 

Demonstrating the company's superior merchandise offering, Lululemon's gross margin in the most recent fiscal quarter was an excellent 58.1%. And investors will gain some insight into its pricing power soon, since leadership will raise prices on select styles this year. This should further boost sales and profitability as I don't see consumers being price-sensitive when it comes to Lululemon's high-quality products. 

Lululemon's incredible growth, particularly in a challenging economic environment for the retail sector, makes the stock a clear buy right now.