Source: Lululemon Athletica.

Over the past several months, lululemon athletica (LULU -0.26%) has undergone a massive transformation in investor sentiment. For years, Lululemon struggled to move beyond its infamous pants recall, with the resulting fallout leading some to believe the yoga-apparel retail specialist had lost its way in serving its once-loyal customer base.

Yet more recently, the company has finally made moves to win back lost customers, and its results have started to show at least some signs of returning to their former growth trajectory. With Lululemon set to give its latest results on Thursday, investors are waiting anxiously to see if the retailer will deliver what they want to see. Let's take a sneak peek at how Lululemon has done lately and what it's likely to tell investors when it releases its results.

Stats on lululemon athletica

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$598.68 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

How lululemon athletica got off the mat
Investors clearly believe Lululemon earnings have turned the corner. The average analyst earnings estimate for the recently ended fiscal fourth quarter has risen by $0.04 per share in the last 90 days and full-year fiscal 2016 projections increased by about 1% during that same time frame. The stock has shown even greater signs of recovery, climbing 21% since mid-December.

Lululemon has already given investors an early look at its most recent quarter. In mid-January, the company updated its guidance, pushing its revenue estimate up to $595 million to $600 million and comparable-store sales forecast up to between 6% and 7% after adjusting for currency fluctuations. CEO Laurent Potdevin said at the time that strong holiday results were driving sales upward, noting that "our guests are responding positively to both the women's and men's product assortment."

Lululemon also raised its earnings guidance by $0.04 to $0.06 per share, demonstrating the company has done well to ensure that higher sales flow through to the bottom line.

Source: Lululemon.

Yet the biggest news in the past quarter was the decision by founder and former CEO Chip Wilson to sever his ties with the company. Last month, Wilson said he would leave Lululemon's board of directors, ending a long series of controversies ranging from his negative comments about whether certain customers should wear the company's apparel to a proxy battle against other board members. The move allows Lululemon to move forward with its efforts to restore and develop its brand identity without the ties to its past that Wilson represented.

Still, Lululemon has a lot of ground to make up. According to the most recent assessment of apparel brands by global marketing and media giant Millward Brown, Lululemon's global brand value fell 13% in 2014 to $3.26 billion. Among top companies, Lululemon was the only brand to lose value during the year, even as Nike (NKE 1.91%) enjoyed a 55% surge in the value of its industry-leading brand.

Moreover, competitors are gaining momentum by encroaching on what used to be Lululemon's home turf. Nike has made an impression throughout the athletic apparel space, but Under Armour (UAA 1.60%) has focused on building up greater share in the female athletic apparel market. Lululemon's quality-control missteps have only bolstered Under Armour's enthusiasm in attacking the segment.

Still, Lululemon isn't giving up. In the company's December conference call, Chief Product Officer Tara Poseley noted that its efforts to cater to men "have been really great, [with a] positive guest response." In addition to addressing known issues with its pants, Lululemon has stepped up testing new core products, along with bringing in greater varieties in print, color, and texture to widen product lines. Lululemon has also seen its efforts to reach out to younger customers pay off, with a rise in brand awareness among teens that could bode well for future business for years to come.

In Lululemon's earnings report, look beyond the headline numbers to see what Potdevin and his team say about the competitive conditions in athletic apparel. As Lululemon and its peers all try to expand into new territory, it'll be more important than ever for the yoga specialist to differentiate itself with high-end customer service and focused attention to detail. In the long run, that's the only way Lululemon is likely to win back customers it lost over the past couple years.