NEW YORK, April 21 (Reuters) - Coach Inc (COH.N) reported a lower quarterly profit on Tuesday 21 April as consumers cut back on discretionary purchases, but the U.S. handbag and accessories maker said sales were stabilizing at its North American stores, and it initiated a quarterly cash dividend.

The leather goods company also said it expected to save $50 million in fiscal 2010, which starts in June, through cost cuts, such as eliminating merit-based salary increases.

Coach's profit fell to $114.86 million, or 36 cents per share, in the third quarter ended on March 28 from $162.4 million, or 46 cents per share, a year earlier.

Excluding a charge, the company said earnings per share were 38 cents. Analysts on average were expecting 36 cents, according to Reuters Estimates.

Sales fell to $739.9 million from $744.5 million, as sales at North American stores open at least a year declined 4.2 percent.

But Chief Executive Lew Frankfort said in a statement that he was encouraged by the stabilization of same-store sales in Coach's North American locations to pre-Christmas levels.

The New York-based company has stayed away from deep profit-sapping discounts in a strategy that has preserved the status of its brand but hurt its sales.

In January it said it would offer more bags in the $200 to $300 range in fiscal 2010, which would reduce overall prices by 10 percent to 15 percent. At that time, Coach also halved its fiscal 2010 North American expansion plans.

Coach said its board had voted to initiate a cash dividend at an annual rate of 30 cents per share. (Additional reporting by Martinne Geller; Editing by Derek Caney and Lisa Von Ahn)