Michael Kors hikes 2018 outlook, sending shares of the handbag maker higher

Key Points
  • Increasing its outlook, Michael Kors now expects total revenue for fiscal 2018 to be roughly $4.59 billion.
  • Full-year adjusted earnings per share are estimated to come in between $3.85 and $3.95.
  • Michael Kors' shares have climbed more than 25 percent in 2017, as the company focuses on its "Runway 2020" plan.
A pedestrian passes by a Michael Kors retail store in New York.
Scott Mlyn | CNBC

Michael Kors is starting to see a lift from its turnaround efforts.

The handbag retailer on Monday raised its sales and profit outlook for fiscal 2018, having finally completed its acquisition of luxury shoemaker Jimmy Choo.

"Our second quarter results were better than expected, and we are pleased with our continued progress executing on our strategic plan, Runway 2020," Chief Executive John Idol said in prepared remarks.

"The positive signs that we are seeing in our business illustrate that our efforts across product innovation, brand engagement and our customer experience are beginning to take hold," Idol added.

Michael Kors' shares were climbing more than 14 percent Monday morning on the news.

The London-based brand on Monday reported fiscal second-quarter net income of $202.9 million, or $1.32 per share, up from $160.9 million, or 95 cents a share, one year ago.

Excluding one-time items, Michael Kors earned $1.33 a share, outpacing a Thomson Reuters consensus estimate for 83 cents.

Total sales climbed 5.4 percent, to $1.15 billion, up from $1.09 billion during the same period last year. Analysts were calling for sales of $1.05 billion, according to a survey by Thomson Reuters.

"Michael Kors has been on a long journey of reinvention, but these latest numbers suggest the brand is starting to reach its destination of reestablishing itself as a well-regarded premium player," GlobalData Retail managing director Neil Saunders wrote in a note to clients.

"Strategically, the decision to buy Jimmy Choo along with the latest collections, suggests that Michael Kors is looking to move into a more exclusive and distinct part of the luxury market," Saunders added.

With another brand in its pocket now, Michael Kors expects total revenue for fiscal 2018 to be roughly $4.59 billion, which includes between $215 million and $225 million of incremental Jimmy Choo sales. Previously, the company was calling for revenue closer to $4.28 billion.

Full-year adjusted earnings per share are now expected to come in between $3.85 and $3.95, which includes an 8-cent impact from Jimmy Choo.

"[Michael Kors is] one of the largest accessories companies in the world," Idol told CNBC earlier this year. "We have two industry leaders with this [Jimmy Choo] deal. ... We feel that the luxury space is the best opportunity long term."

To be sure, Michael Kors increasingly faces competition from other luxury brands and especially handbag maker Coach, which just changed its parent name to Tapestry after it acquired accessories brand Kate Spade earlier this year.

During the quarter, Michael Kors said it created a "platform for future acquisitions," as it continues to pilot refreshed store concepts and maintains a focus on "luxury layering" throughout its product categories.

Including Monday's gains, Michael Kors shares have climbed more than 25 percent in 2017.