Kohl's Corp and Nordstrom Inc beat quarterly profit estimates and raised their 2009 earnings views, defying a still precarious environment for department stores in which both well-to-do and budget shoppers are paring back.

Their results, helped by tighter expense controls and leaner inventories, presented investors with a speck of good news about a struggling industry that has endured months of dismal sales amid the recession.

But Kohl's raised forecast was still below Wall Street estimates and its shares closed the regular session down 1.7 percent and held steady in after-hours trading. Nordstrom shares, which gained over 3 percent in regular trading, added another 3 percent after hours.

Despite a 32 percent drop in quarterly net profit, upscale chain Nordstrom cited lower costs, lean inventory and credit card revenue, tempered by increasing bad debt expenses, for its brighter 2009 earnings outlook.

Profit margins improved at Kohl's, a mid-price department store, and the company cited gains in market share as sales rose a meager 0.4 percent.

That outshone Nordstrom's 9.2 percent fall in sales and sharp revenue drops at rivals, all of which have struggled to entice consumers to spend in the face of fear of job losses, home foreclosures and tight access to credit.

Analysts cautioned the retail sector remained in the doldrums.

It tells us it's tough out there. You'd better be managing your inventory with an iron fist and owning your credit card business has significant risk, perhaps greater risk than people realize, said Stifel Nicolaus analyst Richard Jaffe, who has a hold rating on both companies.

Macy's Inc posted a 9.5 percent drop in first-quarter sales on Wednesday and stuck to its forecast for sales to fall for the full year.

DISCOUNTERS OUTPERFORM?

When they do spend, consumers have sought deep discounts -- a trend likely to persist and help Kohl's, said Liz Dunn, a Thomas Weisel analyst.

A more value-conscious consumer is likely to persist for some time, so Kohl's will continue to be well-positioned from that standpoint, Dunn said.

The world's largest retailer, Wal-Mart Stores Inc , whose low prices have attracted shoppers during the economic slump, posted a roughly flat quarterly profit.

Kohl's beat Wall Street estimates by a penny, according to Reuters Estimates. Net profit fell to $137 million, or 45 cents per share, from $153 million, or 49 cents per share, a year earlier.

Better controlled inventory led to less discounted merchandise in stores, the company said.

Kohl's raised its full-year per-share profit forecast to $2.42 from $2.19, above an earlier estimate of $2.00 to $2.30 per share. But analysts expected $2.55 a share.

Retailers are using different tactics they hope will keep shoppers coming back despite the downturn. Kohl's is selling exclusive brands from designers and celebrities, such as Dana Buchman and Lauren Conrad, while J.C. Penney Co Inc touts its own brands, such as Fabulosity by Kimora Lee Simmons.

Macy's is tailoring its stores to fit local trends.

Exclusive brands, although higher-priced, were lending a boost, Kohl's Chief Executive Kevin Mansell said in an interview.

NORDSTROM'S CREDIT CARD WOES

Nordstrom said it remained committed to its credit card program, despite the risk it entails in the downturn, because cardholders tend to buy more and the program allows the retailer to stay in contact with shoppers.

While the retail portion of our business is becoming less volatile, our credit card trends were worse than planned, said Chief Financial Officer Michael Koppel.

The company front-loaded its provision for bad debt in the first quarter in a conservative posture that may provide a cushion going forward, analyst Jaffe said.

Nordstrom's net profit fell to $81 million, or 37 cents per share, in the first quarter, compared with $119 million, or 54 cents per share, a year earlier.

Excluding a one-time gain, earnings were 31 cents per share, above the 26 cents per share forecast, on average, by analysts, according to Reuters Estimates.

For fiscal 2009, Nordstrom now expects to earn $1.25 to $1.50 per share, assuming a same-store sales decrease of 10 percent to 15 percent. In February, it gave an earnings range of $1.10 to $1.40 per share on the same sales decline.

Kohl's shares closed down at $41.24 on the New York Stock Exchange after rising as high as $43.94 earlier.

Nordstrom shares rose to $21.60 in after-hours trading after closing at $20.95, up 3.4 percent.

(Reporting by Aarthi Sivaraman and Alexandria Sage; Editing by Edwin Chan and Andre Grenon)

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