What happened

Shares of Michael Kors Holdings (NYSE:KORS) surged Tuesday morning after the luxury fashion giant posted a better-than-expected fiscal first-quarter 2018 earnings report, and lifted its full-year guidance.

As of 12:50 p.m. EDT, the stock was up 21.6%.

A Michael Kors model looks into refracted mirror holding a makeup kit with a handbag hanging off of her shoulder.

Image source: Michael Kors.

So what 

The quarter, which ended July 1, was far from stellar, as comparable sales were down 5.9% (and  4.9% in constant currency), but results still blew past expectations. Revenue fell 3.9% to $952.4 million, compared to analysts' consensus estimate of $918.6 million, as strong performance in China, including the opening of 67 stores, helped offset lagging sales elsewhere. Earnings per share slipped from $0.90 to $0.80, but the result was still well ahead of both  management's own guidance range of $0.60 to $0.64 and the analysts' consensus figure of $0.62.

CEO John Idol said that better-than-expected comparable sales in North America and Europe drove the outperformance, but he emphasized that fiscal 2018 would still be a transition year. He also touted the recent acquisition of Jimmy Choo, saying the purchase will allow the company to form a "global luxury fashion group."

Now what 

Michael Kors also lifted its full-year revenue outlook modestly from $4.25 billion to $4.275 billion, and said it sees comparable sales declining in the mid-single digits as opposed to a prior range of high-single digits. It also bumped up earnings per share expectations from a range of $3.57 to $3.67 to a range of $3.62 to $3.72. 

That guidance does not include the impact from the Jimmy Choo acquisition, which is expected to add $275 million in incremental revenue in the second half of the year and $570 million to $580 million next year.

While it's certainly too early to declare Michael Kors' turnaround a success -- especially given that sales and profits are still falling -- the report and outlook offer some hope that the company can stabilize itself and grow profits again. 

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of Michael Kors Holdings. The Motley Fool has a disclosure policy.