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Lululemon Finds "Mantra" In A Niche Market

Revenge is bittersweet for Lululemon Athletica . Short interest in the stock is at 21 percent of the float right now and today's rally may have something to do with short covering.

That said, investors who subscribe to Credit Suisse analyst Paul Lejeuz's thinking (his rating is outperform) would say that this yoga wear company has earned the right to a rally.

Understanding Lululemon's fourth quarter earnings successrequires walking into a store and seeing their product firsthand. I wouldn't expect relatively expensive workout clothes (average ticket is $100) to be able to sell during this consumer slowdown. The consumers' hesitation or inability to spend on discretionary items is a problem for many stores out there.

But Lululemon managed to post fourth quarter earnings of 21 cents per share (versus the 19 cents per share that Wall Street expected) up from just a penny a share during the same quarter last year.

The company's decision to pull out of Japan seems to be grabbing headlines but the comment that grabbed my attention was company CEO Bob Meers' mention that the company spent way more on freight costs than they expected. Why? Stores were running out of product!

Yes air-freight charges hurt margins and added to expenses, but here's the point: Lulu is able to sell pricey product at a time when consumers are cutting back on clothing, shifting to generic brand groceries and trading down to warehouses to do their shopping. Clearly a sign that if merchandising is strong, this niche market can buck the consumer trend.

Anyhow, check out my interview with current CEO Meers and incoming CEO Christine Day at 3:50 pm ET on the "Closing Bell" this afternoon. The timing of Meers' scaled back role surprised some. He'll step down in June and hand over management to the former Starbucks alum Day.

Let me know what you think of the interview! After the show, I'll post the interview segments that didn't make air right here on this blog.

Questions? Comments? retaildetail@cnbc.com