What happened

Shares of lululemon athletica (NASDAQ:LULU) climbed 48.2% in the first half of the year, according to data provided by S&P Global Market Intelligence.

The company continues to benefit from a healthy market for athletic apparel. Most importantly, management believes the company is just getting started: It has its sights set on quadrupling international sales over the next five years, while it seeks to double the size of the men's and the digital businesses. 

A young woman wearing athletic clothing while running.

IMAGE SOURCE: GETTY IMAGES.

Strong operating performance is one factor that has lifted the stock, but the share price has also gotten a boost from investors' willingness to pay a higher earnings multiple. The forward price-to-earnings ratio was about 32 at the start of the year and recently reached 39 times this year's earnings estimate. 

So what

Lululemon is growing at very fast rates and generates some of the highest margins in the retail industry, which is a good sign that the brand is resonating at a level that can insulate the company from competition. The brand continues to gain popularity in both the Asia-Pacific region and Europe; sales climbed 40% year over year in both regions during the first quarter. 

What's more, Lululemon's gross margin is still climbing, reaching 55.3% over the last year, and management still sees a path to higher profitability through improvements to the supply chain and growing penetration of digital sales. 

Now what

Based on the strong start to the year, management raised its full-year outlook for revenue and earnings per share. Revenue is expected to be up 13.6% year over year at the midpoint of guidance, while earnings are expected to increase by 18.3%.

Investors will want to keep an eye on management's three growth pillars, such as sales growth in men's, digital, and international. Asia is a particularly important market for Lululemon. After a recent visit to China, COO Stuart Haselden said during the earnings call, "While we are seeing exciting momentum across all of our international markets, China in particular is on track to post impressive growth this year." 

Perhaps more exciting is that the North American market continues to grow at double-digit rates, too. With the business performing this well, it's understandable why the stock sports a high valuation, but the company will have to keep up the momentum to justify the stock's high price tag.