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Michael Kors' share price surged Tuesday after the designer reported stronger comparable sales in North America and Europe and quarterly profit and revenue that beat expectations.
By late morning, the share price was up nearly 20 percent.
In its earnings report for the fiscal first quarter, Kors said profits fell 15 percent and revenue was down 3.6 percent from a year earlier, but the results far exceeded expectations.
Kors also raised its sales outlook for the full year, showing signs that its turnaround efforts were working.
"We are encouraged by our first quarter performance, although we continue to believe that fiscal 2018 will be a transition year for our company, as we focus on laying the foundation for the future by executing on our strategic plan," CEO John Idol said in a statement.
The luxury fashion designer said its fiscal first quarter net income attributable to the company dropped 15 percent to $125.5 million, or 80 cents per share, from $147.1 million, or 83 cents a share, a year earlier.
The previous fiscal first quarter figure included one-time costs related to the acquisition of a Greater China licensee. Excluding that charge, Kors had earned 90 cents a share.
While its profits fell, the results outpaced expectations: Analysts surveyed by Thomson Reuters on average had predicted Kors would earn 62 cents per share. That was also the midpoint of the company's own forecast range.
"The numbers are something of a step forward," GlobalData Retail Managing Director Neil Saunders wrote in an email to clients.
"While the numbers may strengthen [from here], the rest of this fiscal year will essentially be one of rebuilding and refining the brand, as well as closing further excess capacity and investing in channels and stores that have the best forward potential."
Total revenue for the first quarter came in at $952.4 million, again topping analysts' estimates for sales of $918.6 million, according to Thomson Reuters.
Saunders said the drop in revenue from last year was more a "necessary evil" than a surprise as Kors leaves stores that no longer fit the brand's new strategy. "Reducing ubiquity comes with a price attached," he said.
Michael Kors' same-store sales dropped 5.9 percent during the period, but analysts surveyed by FactSet had predicted a 9 percent decline.
"This trend of beating expectations is likely to continue as the top line appears on a path of improvement from here," Jefferies analyst Randal Konik wrote in a note to clients. The "turn [is] taking place."
Earlier this summer, Kors announced plans to buy London-based shoemaker Jimmy Choo in a deal valued at $1.2 billion.
"This will not be [Michael Kors'] last acquisition," CEO Idol told CNBC in a phone interview shortly after the acquisition was announced.
Idol has reiterated time and again that Michael Kors is focused on forming a "luxury group." On Tuesday, he added that a more diverse portfolio will play well as the retailer looks to increase exposure in international markets.
Michael Kors has seen its same-store sales drop in recent quarters, with fewer shoppers flocking to brick-and-mortar department stores to ring up big purchases. Additionally, the retailer's core handbag business has slowed, with competitors rolling out heavier discounts and promotions, enticing women to shop for bargains.
The pressure on Kors intensified in May, when rival Coach agreed to buy Kate Spade in a $2.4 billion deal.
In updating its outlook, Kors said that once the Jimmy Choo deal is finalized, incremental revenue will be about $275 million for the second half of fiscal 2018. And in fiscal 2019, Michael Kors expects incremental revenues of $570 million to $580 million.
Not including results from Jimmy Choo, Kors raised its annual revenue forecast to about $4.28 billion and called for comparable sales to decrease only to the midsingle digits. It previously expected sales of $4.25 billion.
"Management guided to both better top and bottom-line metrics for next quarter and the fiscal year, which is key as the market has been afraid of more guidance cuts," Konik said. "That's simply not happening."
The analyst added that the "strategic direction is positive" for Kors from here on out.
As of Monday's close, Michael Kors' stock has dropped about 26 percent in the past 12 months, including nearly 13 percent this year. In the past month, the stock has inched up 3.3 percent.