Shares of Michael Kors Holdings (NYSE:CPRI) 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%.
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."
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.