Michael Kors (KORS) is expected to report a year-over-year increase in earnings but a decline in revenue for the fiscal 2017 third quarter before tomorrow's opening bell as promotional pressures persist in the handbag market. 

Analysts surveyed by FactSet are looking for earnings of $1.63 per share on revenue of $1.36 billion. The luxury brand reported earnings of $1.59 per share on $1.40 billion in revenue for the year-ago period. 

Analysts at Canaccord Genuity expect the quarter to be in line with consensus estimates, but warn of longer-term obstacles including the decision not to participate in promotions, European consumers' preference for smaller bags and heightened competition from Coach  (COH) .

"The KORS customer has been trained to expect the brand to be on sale and as such we believe that once the promotions go away, consumers will likely follow," analyst Camilo Lyon wrote in a note today.

Coach and Tory Burch are well-positioned to take market share, Lyon said. 

He noted that Michael Kors could soften these risks with high free cash flow and a potential sale of its business.

Deutsche Bank analysts take a more bullish long-term view of the company, reiterating a "buy" rating on Sunday.

The analysts believe that headwinds from tourism and currency rates will begin to lessen. Gross margin should benefit from geographic and channel shifts and spending on selling, general and administrative expenses should slow in fiscal 2017, they said.