Leather goods maker Coach Inc reported a larger-than-expected quarterly profit as U.S. luxury spending rebounded and sales in China soared over the holiday season.

Coach, best known for its high-end handbags and wallets, reported net income of $303.4 million, or $1 per share, for the second quarter ended January 1, up 26 percent from $240.9 million, or 75 cents per share, a year earlier.

Sales rose 18.7 percent to $1.26 billion, fueled by a 12.6 percent increase at stores open at least a year in North America, which account for the bulk of the company's business.

On average, Wall Street analysts were expecting a profit of 97 cents per share on sales of $1.21 billion, according to Thomson Reuters I/B/E/S.

In China, where Coach is still new to the market but now operates 52 stores, sales rose by double digits on a percentage basis.

Coach has positioned itself in the affordable luxury segment in the past two years as shoppers have cut back on the most expensive items. It has lowered average prices on its handbags by about 10 percent by introducing new, more affordable lines and expanding its outlet stores.

Coach also got a boost from strong sales to U.S. department stores, such as Macy's Inc .

Coach also said its board had authorized the repurchase of up to $1.5 billion of its outstanding common stock.

Shares of Coach were down 2.5 percent at $52.01 in trading before the market opened.

(Reporting by Phil Wahba; Editing by Derek Caney and Lisa Von Ahn)