UPDATE 3-Coach profit, sales beat Wall St view

* Q1 EPS $0.44 vs Wall Street view of $0.39

* Sees gradual EPS improvement vs yr ago for rest of FY

* Plans to open first mainland China store in Spring 2010

* Shares up 1.4 pct (Adds CEO, analyst comments, details, stock action, byline)

CHICAGO, Oct 20 - U.S. leather goods company Coach Inc reported a higher-than-expected quarterly profit on Tuesday, helped by demand for its new, less-expensive Poppy line.

The maker of handbags, wallets, shoes, jewelry and other accessories also expects earnings per share to show gradual improvement for the balance of the fiscal year when compared with the prior year, Chief Executive Lew Frankfort said in a telephone interview.

"Consumers are starting to feel a bit more confident that the economy is stabilizing, that the outlook is no longer dire," he said, adding that he expected a stronger holiday shopping season for the overall industry.

Shares of the company rose 1.4 percent premarket.

Coach's net income was $140.8 million, or 44 cents a share, in the first quarter ended on Sept. 26, compared with $145.8 million, or 44 cents a share, a year earlier.

Analysts on average were expecting 39 cents a share, according to Thomson Reuters I/B/E/S.

Sales rose 1.2 percent to $761.4 million, above the $753.8 million analysts had expected.

"Coach is supporting evidence that consumers on a global scale are rethinking the occasional nonfood splurge," Wall Street Strategies analyst Brian Sozzi said in a research note.

Sales at stores open at least a year, or same-store sales, fell 1 percent in North America, an improvement from the previous quarter when same-store sales fell 6.1 percent. In China, same-store sales rose at a double-digit rate.

Sozzi said the same-store sales decline in North America was not as weak as expected.

Coach said its new Poppy line, which is aimed at younger women with its bright colors and lower prices, helped increase store traffic from the previous quarter.

The company also gained market share and saw increased sales in its stores of handbags, which carry higher profit margins, Frankfort said.

The average price of a Poppy bag is $260, about 20 percent less than the usual Coach purse. The line's introduction is part of a plan by Coach to reduce overall prices by 10 to 15 percent and appeal to more cost-conscious shoppers.

Coach is also seeing rapid growth in China, and plans to open its first mainland China flagship store in Spring 2010 in Shanghai. It expects to open an Asian distribution center in Shanghai before the end of the fiscal year to better manage growth in the region.

Sozzi said China now accounts for 2 percent of the company's annual revenue.

Shares of Coach rose 1.4 percent in premarket trading to $35 from Monday's closing price of $34.51 on the New York Stock Exchange.