Kate Spade & Co. swung to a profit in its latest quarter as sales grew.

Total sales increased 5.7%, the company said, boosted by a 12% rise in sales at stores open at least a year. While results missed analysts' expectations, investors pushed shares 5.2% higher premarket as the retailer outperforms its peers.

Kate Spade, the former Fifth & Pacific Cos. and Liz Claiborne Inc., has narrowed its focus amid weakness in the handbag market, shedding dozens of labels—such as Lucky Brand and Juicy Couture—over the past several years. Earlier this year, the retailer said it would close its Kate Spade Saturday and Jack Spade stores as it seeks to focus on its flagship Kate Spade New York brand.

Like some of its rivals, the retailer has worked to reduce profit-eating promotions. But unlike at Coach Inc., sales still rose amid a pullback in promotional activity. On Wednesday, Kate Spade Chief Operating Officer George Carrara said margin expansion improved during the quarter and the company lifted the low-end of its full-year adjusted profit guidance.

"The shift to even less discounting and an emphasis on returns is beginning to pay dividends," analysts at Wunderlich Securities said in a note this week. The analysts also said handbags are a much smaller piece of the mix for Kate Spade, compared with rivals including Michael Kors and Coach, whose shares "remain in various stages of free fall."

In all, for the quarter, Kate Spade reported a profit of $8.5 million, or seven cents a share, compared with a loss of $4.4 million, or three cents a share, a year earlier. Excluding certain items, per-share earnings increased to eight cents from five cents.

Revenue grew to $281 million.

Analysts projected 11 cents in earnings per share and $293 million in revenue, according to Thomson Reuters.

Gross margin rose to 61% from 58.6% a year earlier.

Shares in the company, down about 36% this year, rose to $21.80 premarket.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

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