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(Adds background on company's share buyback, analyst comment, details on margins, shares)
May 9 (Reuters) - Tapestry Inc on Thursday unveiled its biggest buyback plan in nearly seven years and beat Wall Street estimates for third-quarter profit as it sold more Coach and Kate Spade handbags, sending its shares up 17 percent.
The company is planning to buy back $1 billion in stock, representing about 11 percent of its shares outstanding, a move aimed at placating investors after weak holiday quarter sales and recent underperformance at the Kate Spade brand.
"Not having a buyback authorization has been a point of frustration among investors and we expect this to be well received," Bernstein analyst Jamie Merriman said.
The stock closed at $30.75 on Wednesday, near its 52-week low of $30.05 after a 9 percent decline this year.
Tapestry has struggled to boost sales at millennial-focused Kate Spade, which it bought in 2017, as the lack of new designs put off shoppers and heavy discounting dented margins and brand value.
The company last year hired Gucci and Michael Kors alumnus Nicola Glass as Kate Spade's creative director, whose designs found favor with shoppers in the latest quarter, helping the brand post a 4.5 percent rise in sales.
Although sales at established Kate Spade stores fell 3 percent, they beat a 4.04 percent decline estimated by analysts, according to IBES data from Refinitiv estimates.
"(The company) generated a significant sequential comp improvement at Kate Spade with Nicola Glass's new collection resonating with consumers globally," Chief Executive Officer Victor Luis said.
Tapestry has also been pulling inventory from department stores and cutting back on flash sales in an effort to maintain its exclusivity.
Those efforts propped up SG&A margins in the third quarter to 60.8 percent from 56.6 percent a year earlier.
Excluding items, the company reported a profit of 42 cents per share in the third quarter ended March 30, beating analysts' estimates by 1 cent.
Comparable sales at Coach rose 1 percent in the quarter, also topping the average estimate of a 0.84 percent rise. But overall sales fell at the brand, which contributes about 72 percent to the company's business.
Net sales rose nearly 1 percent to $1.33 billion but narrowly missed the average expectation of $1.34 billion. (Reporting by Aishwarya Venugopal in Bengaluru Editing by Saumyadeb Chakrabarty)