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.

Net profit for the first quarter 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 Inc and J.C. Penney Co Inc .

Kohl's Chief Executive Kevin Mansell said in a statement that growth will pick up in the current quarter thanks to more intense marketing and pent-up demand. Kohl's posted some of the strongest same-store sales gains among department stores in 2010.

One investor said Kohl's efforts to offer shoppers more exclusive merchandise, including a line of clothing by entertainer Jennifer Lopez coming this fall, will help because it gives shoppers a reason to go to a Kohl's store rather than a rival.

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, stayed 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.

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

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