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Coach reports first quarterly profit growth in three years

Shoppers pass a Coach display in Macy's, New York.
Scott Mlyn | CNBC
Shoppers pass a Coach display in Macy's, New York.

Coach, which has been trying to regain its cachet in the luxury handbag market, reported its first growth in quarterly profit in three years.

The maker of the Swagger line of leather handbags also reported its second consecutive quarter of sales growth, spurred by demand in China, Japan and Europe.

The results show that Coach's efforts to reinvigorate its business are paying off after the brand lost its premium status due to an expansion spree that resulted in its brand becoming ubiquitous.

The 75-year-old company has renovated stores, cut back on promotions and appointed well-known fashion designer Stuart Vevers as head of its creative team to win back market share from newer entrants such as Michael Kors Holdings and Kate Spade.

The company's shares closed up more than 4 percent Tuesday.

"The better numbers add to the sense that the long promised recovery of the brand is starting to materialize," said Neil Saunders, chief executive of research firm Conlumino.

Coach also said it would cut an unspecified number of corporate jobs, including management positions, and take a pre-tax charge of about $65 million to $80 million in the fourth quarter.

The company said Chief Operating Officer Gebhard Rainer and global marketing President David Duplantis would leave the company.

Sales in North America, the company's biggest market, rose 1 percent in the quarter. In China, another key market for the company, sales rose 2 percent on a constant currency basis.

Comparable sales for the Coach brand in North America were flat in the third quarter ended March 26, ending three years of declines. Analysts had expected a drop of 1.4 percent, according to Consensus Metrix.

Coach said it was on track to return to comparable store sales growth in North America in the fourth quarter.

Total revenue rose 11.2 percent to $1.03 billion, beating average analyst estimate of $1.02 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to shareholders rose more than 25 percent to $112.5 million, or 40 cents per share. Excluding items, the company earned 44 cents per share.

Analysts on average had expected earnings of 41 cents per share.