May 12 - Kohl's Corp reported a higher quarterly profit as the mid-price department store chain kept gross margins steady despite rising cotton prices, and the retailer raised its full-year profit forecast.

Kohl's department store - Photo: Reuters

Sales will pick up in the current quarter thanks to more intense marketing and pent-up demand, Chief Executive Kevin Mansell said in a statement.

Mansell's optimism, coupled with Macy's Inc's strong quarterly results and rosy forecast on Wednesday, are the latest signs that the middle-class consumer is staging a comeback.

U.S. retail sales rose for the 12th straight month in April, the Commerce Department reported on Thursday.

Kohl's said first-quarter net profit rose 6 percent to $211 million, or 73 cents a share, from $199 million, or 65 cents, a year earlier. That was in line with Wall Street estimates.

Net sales were up 3.1 percent at $4.16 billion.

As previously reported, sales at stores open at least a year rose 1.3 percent during the quarter, which ended on April 30, below the pace of rivals Macy's and J.C. Penney Co Inc.

Kohl's, which caters to a more price-sensitive shopper than Macy's, posted some of the strongest same-store sales gains among department stores in 2010.

Department stores have been eager to offer exclusive products that give shoppers a reason to go to one store over another. And exclusive lines give stores more leeway in setting prices, making it easier to contend with rising cotton costs.

Kohl's said exclusives now accounted for half of its sales.

One investor said Kohl's efforts, including a line of clothing by entertainer Jennifer Lopez coming this fall, will help the chain later this year.

"Kohl's is in a good position because of new brands hitting in the fall," said Walter Stackow, an analyst with Manning & Napier, which owns Kohl's shares.

Gross margin, which gauges the profitability of the goods Kohl's sell, remained steady at 38.1 percent in the first quarter despite rising cotton costs.

Merchandise inventory rose 5.8 percent, in line with sales gains. The figures mirror efforts by Macy's not to build up too much inventory in case shoppers pull back, forcing retailers to slash prices on goods they can't sell.

"It (tight inventory) will mitigate the damage from rising cotton prices," Stackow said.

Kohl's, which operates nearly 1,100 department stores, raised its full-year earnings per share forecast to a range of $4.25 to $4.40. Analysts on average expect $4.36, according to Thomson Reuters I/B/E/S.

The previous Kohl's forecast was $4.05 to $4.25. The company said some of the increase stems from planned share repurchases during the current quarter.

For the current quarter, Kohl's expects to earn between 96 cents and $1.02 per share, compared to Wall Street's view of $1.

Mansell said Kohl's was still on pace to reach $1 billion in e-commerce sales this year. In the fiscal year ended in late January, just under 4 percent of Kohl's $18.4 billion in sales were made online.

During the first quarter, Kohl's opened nine new stores and remodeled 30. By the end of the year, it expects to open 31 more stores and update 70 more.

(Reporting by Phil Wahba; Editing by Derek Caney and John Wallace)