Every once in a while, a retail company explodes onto the scene and its stock price skyrockets. For example, athletic shoe and apparel maker Nike (NYSE: NKE) saw its stock price multiply more than 40 times between 1987 and 1997. More recently, the stock of high-end leather goods maker Coach (NYSE: COH) increased more than 25 times between 2000 and 2007. Specialty retail operator Urban Outfitters (Nasdaq: URBN) scored a 30 bagger between 2000 and 2005.

Now, there's a new sensation.

This company has increased earnings per share more than tenfold since 2006. In fact, this retail juggernaut continued to grow earnings at a strong clip straight through the financial crisis, and, as the economy has recovered, it has nearly doubled earnings since just last year. Meanwhile, the environment for retailers seems to be getting better and better. Consumer spending in the fourth quarter grew at the fastest rate since 2006 and most analysts are bullish on the economy for 2011.

Lululemon Athletica (Nasdaq: LULU) is a Vancouver-based company that sells athletic apparel through more than 130 retail stores in the United States, Canada and Australia. The company's focus has been on high-end yoga apparel for women, but it is branching out into general fitness and men's apparel. The first store was opened in 2000 and its IPO was in 2007.

But this is no ordinary retail store.

The company doesn't just sell workout clothes. It seems to have launched a new phenomenon. It has combined workout wear with high fashion in such a way that its styles and brand image invoke a sense of belonging to a modern athletic lifestyle. Lululemon has tapped into a powerful societal trend of a more holistic and healthy lifestyle, creating a large and growing army of loyal patrons. The company sells a culture and an attitude that will be difficult for competitors to duplicate.

The stock performance has been absolutely phenomenal.

Lululemon soared 141% during the past year after returning 280% in 2009. But therein lies the danger. The stock currently sells at about 50 times earnings compared with an industry average of 30. Many believe the stock has become too expensive. But there are good reasons to believe the stock still has room to run.

While the company is growing its customer base in existing markets, it is just starting to branch out internationally. Lululemon's revenue grew by a compound annual growth rate of 52% since 2005 and is continuing its aggressive growth. The company opened 12 new stores in 2010 and plans to open another 20-25 in 2011. Recently, Lululemon increased its fourth quarter earnings guidance by more than 10% and predicted that same store sales would grow at least 25% in the quarter.

Action to Take --> Lululemon's brand and stock have a proven ability to catch fire. A likely strong environment for retail companies in 2011 should enable the company to have another stellar year. While somewhat pricey, the company appears to be in a huge growth spurt that still has legs. The stock can still be purchased under $70.

-- Tom Hutchinson