Dive Brief:

• Michael Kors on Wednesday reported second quarter revenue rose 9.3% year over year to $1.25 billion. Net income fell to $137.6 million from $202.9 million, and gross margin reached 60.9% from 60.2% last year, according to a company press release.

• By segment in the quarter: Michael Kors retail revenue was about flat at $643.9 million as total revenue (retail, licensing and wholesale) fell 0.8% and comparable-store sales fell 2.1%. Revenue at Jimmy Choo, acquired a year ago, grew year over year by "double digits" to $116.7 million, though it posted an operating loss of $18.4 million, the company said.

• The company will rebrand to Capri Holdings Limited when it closes its acquisition of Italian fashion brand Versace in the fourth quarter, the company said.

Dive Insight:

Michael Kors' healthy earnings in the second quarter had more to do with tax cuts than its brands' performance. (The company got a boost to income as its tax provisions fell by more than half from last year, to $14.9 million.) That bodes poorly for Michael Kors' ability to take on Versace, considering how much rehabilitation the Italian fashion house requires.

The company was beset by some currency and inventory issues in the quarter, and got its mix of logo-centric apparel wrong, misjudging appeal, executives said on a conference call Wednesday, according to a transcript from Seeking Alpha. Once Versace joins the fold, the company anticipates Capri Holdings "to accelerate revenue to $8 billion and deliver multiple years of earnings growth," CEO John Idol said.

But some analysts expressed skepticism about Capri's potential. "We believe management is losing control of the Michael Kors model as it seeks to distract attention through additional acquisitions where it has little room for error given high prices paid," William Blair analyst Dylan Carden said in a note emailed to Retail Dive. Carden also noted that the flagship Kors brand is struggling with retail comps, a wholesale segment that remains too large and licensing issues it still must recover from.

The flagship brand has also so far failed to follow the path of Coach, which moved from over-exposure and price pressures to a luxury stance that has captured attention and dollars. "[T]he Michael Kors brand is not back to full strength and it still suffers from a lack of definition and a reputation tarnished by years of ubiquity," GlobalData Retail Managing Director Neil Saunders said in comments emailed to Retail Dive. 

The brand continues to demand $2,450 for a Michael Kors Collection handbag, while its lower-priced Michael by Michael Kors bags are available department store clearance sections for under $51, Saunders noted. "The proposition lacks cohesion and sends confused messages to consumers," he said, adding that his firm's data suggests Michael Kors is still seen as "somewhat unsophisticated and less polished than many other luxury brands."

Those struggles are a cautionary tale for the integration of Versace, which also needs reinvigorating, Saunders said, adding that "the deal may prove to be a further distraction from fixing core problems with the main brand."