* Q1 EPS 44 cents, tops Wall St view by a penny
* Cuts '09 sales view; keeps EPS view of $2.25
* Says To keep costs down, hold off on renovations
* Sees holiday Q2 EPS of 77c, tops analyst view of 75c
* Shares up 14 percent (Recasts with comments from analysts, CEO; changes headline)
NEW YORK, Oct 21 (Reuters) - Coach Inc (COH.N) forecast holiday season profits ahead of Wall Street's view and stood by its full-year outlook, saying cost controls would help it withstand weaker demand for its handbags and accessories.
The company's shares surged 14 percent.
Coach, which also sells sunglasses, scarves, shoes and jewelry, reported quarterly earnings slightly above Wall Street estimates on Tuesday due to strong sales in Asia that offset disappointing results at home.
The fact Coach kept its earnings outlook in the face of a precipitous decline in luxury sales triggered a "sigh of relief" for investors, said Pali Capital analyst Stacey Widlitz.
"Investors were bracing for a worst-case scenario and we just didn't get it," Widlitz said. "At the same time, Coach is being very cautious. They're aware that the environment is probably not getting any better in the near term, and they're ... planning for that."
Widlitz has a "buy" rating on Coach shares, which are down 56 percent from the 52-week high they touched last October.
In an interview, Coach Chief Executive Lew Frankfort told Reuters nobody is immune to the financial crisis, which has rattled markets and raised fears of a global recession.
"The trends worsened during the quarter for Coach as they did for the rest of retail," he said. "Although during October our trends held and we're tracking on plan to our guidance for the second quarter."
Coach forecast second-quarter earnings of 77 cents per share on sales of $1.05 billion. Analysts on average forecast 75 cents per share on revenue of $1.09 billion, according to Reuters Estimates.
"It's going to be a very challenging holiday season for many retailers," Frankfort said.
Net income for Coach's fiscal first quarter, which ended on Sept. 27, fell about 6 percent to $145.8 million. Earnings per share rose to 44 cents, up from 41 cents a year ago, due to a lower share count.
Analysts had been expecting 43 cents per share.
Lazard Capital Markets analyst Todd Slater upgraded Coach shares on Tuesday to "buy" from "hold," saying Coach shares are oversold, despite the wider economic fears.
"Coach has built an unusually solid balance sheet, a key to survival in a period of hyper economic uncertainty," Slater wrote. "Coach is in the enviable position ... to not only pursue its growth initiatives overseas, but also to continue to buy back stock opportunistically if it so desires."
Quarterly net sales rose to $752.5 million from $676.7 million a year ago. Higher sales at Coach boutiques offset declines at U.S. department stores, where store traffic has fallen as consumers change buying habits in an economic slowdown.
Sales in Coach's main retail unit rose 16 percent, driven by double-digit gains in Japan and China. Sales at North American Coach stores open at least a year, also known as same- store sales, rose a mere 0.6 percent.
Wholesale sales fell 3 percent to $160 million, as U.S. department stores ordered less merchandise.
Frankfort said Coach's expansion plans have not changed. He still sees Coach opening about 40 full-priced stores in North America, 10 in Japan and five in China in fiscal 2009.
The company expects full-year sales to rise about 10 percent to $3.5 billion, down from a prior forecast that called for growth of 13 percent. However, it still expects earnings of about $2.25 per share, as it plans to control costs by deferring projects such as store renovations.