Michael Kors Holdings (CPRI -1.36%) has gone through a turbulent period over the past several years, as the upscale fashion retailer has had to navigate ever-changing consumer preferences. The result has been a lot of ups and downs for Kors' stock price, and although the growth that's resulted from Kors' acquisition of Jimmy Choo has been welcome, it hasn't always been enough to mask some of the weakness in Kors' legacy business.

Coming into Wednesday's fiscal second-quarter financial report, Kors investors were prepared to deal with somewhat weak earnings numbers compared to year-earlier results, but they wanted to see solid growth in sales. Kors wasn't able to give investors everything they would have liked, and even with an optimistic outlook, some shareholders remain skeptical about the retailer's long-term strategy to regain its once-enviable position in luxury fashion and accessories.

Michael Kors storefront as seen from a white-tiled mall.

Image source: Michael Kors.

Dealing with a mixed performance

Michael Kors' fiscal second-quarter results didn't sustain the momentum the company had produced in the first quarter of fiscal 2019. Revenue grew 9% to $1.25 billion, decelerating from the 26% growth rate that Kors posted three months ago, and falling short of the 10% growth rate that those following the stock had wanted to see. Adjusted net income dropped 6% to $192.5 million, and that produced adjusted earnings of $1.27 per share. That number topped the consensus forecast among investors by a healthy $0.17 per share.

As we've seen throughout the past year, the Jimmy Choo acquisition played a necessary role in pushing Kors' overall revenue higher. The acquired business accounted for $116.7 million in revenue, which was higher by double-digit percentages compared to how Choo did during the same period last year as an independent company prior to the acquisition. Yet on a bottom-line basis, Jimmy Choo didn't offer ideal results, posting an adjusted operating loss of $7.4 million for the quarter.

The legacy Michael Kors segment didn't do nearly as well. Overall segment revenue eased lower by 0.8%, with modest declines throughout the unit. The retail division saw sales slump 0.2% on a 2.1% drop in comparable-store sales, which was an unfortunate reversal compared to the fiscal first quarter's small gain in comps. Wholesale revenue fell 1.3% from year-ago levels, and the licensing unit saw a nearly 7% drop in sales. Adjusted operating earnings saw mixed results, with roughly 20% declines in retail and a 10% fall in licensing offset in part by a 6% boost from the wholesale division.

From a geographical perspective, Kors kept seeing a change in trends compared to previous years. The Americas region was the big driver of growth in sales, with gains across the board. Europe, meanwhile, weighed on Kors' top line once you take out the impact of the Jimmy Choo acquisition, and gains in Asia were once again small.

What does Kors see in its future?

Michael Kors was generally pleased with its results, but it's spending more of its effort looking forward, especially after a huge strategic move that it hopes will pay big dividends. As CEO John Idol described it:

As we enter the second half of fiscal 2019, we look forward to welcoming Versace into our group. With the acquisition of Versace, we have built one of the world's leading fashion luxury groups in just one year, setting the stage for accelerated revenue and earnings growth.

The September purchase of Versace had Kors investors feeling uncertain at the time of the announcement, and some of those concerns still seem to have lingered. The $2.1 billion price tag was high in some investors' eyes, especially given the Italian fashion company's lackluster sales trends and negative short-term impact to Kors' earnings. Competition remains fierce in fashion, and high-end retailers in particular are vulnerable to potential downturns in the global economy.

Yet those worries didn't hurt Kors' enthusiasm. The company boosted its full-year earnings estimate by $0.05 per share, setting a new range of $4.95 to $5.05 per share. Kors maintained its $5.125 billion full-year sales guidance, and it believes it will see $1.46 billion in sales in the fiscal third quarter to produce earnings of $1.52 to $1.57 per share. Those quarterly figures were lower than investors had expected, especially on the bottom line, where the consensus forecast coming into the report was for $1.82 per share in earnings.

Shareholders weren't pleased with the news, and Kors stock dropped 16% at the open of the trading session following the announcement. Acquisitions have put Michael Kors in position to grow, but it now has to turn its expanded footprint into greater profit in order to reassure investors that the company's strategic direction is good for its long-term prospects.