Macy's Inc reported a higher quarterly profit and said it expects a continued upswing in sales and profits for the rest of 2011, reflecting the improving fortunes of middle-class shoppers, its core customers.

Macy's shares jumped more than 6 percent on the news to their highest level in more than three years.

Macy's is benefiting from a years-long effort to offer more exclusive and regionally focused products, which command a higher profit per item and gives the chain more pricing power.

The strong first-quarter sales and forecast for the rest of the year signal what analysts said is a more forceful comeback for shoppers after the economic crisis as U.S. consumer confidence and employment have risen.

There is a bit of middle-class tailwind, said Morningstar analyst Paul Swinand. This bodes well, but less so, for the Sears shopper or the J.C. Penney shopper.

Macy's, which Swinand said is less exposed to the price sensitivity of shoppers than rivals Penney and Kohl's Corp , said sales at its stores open at least a year, or same-store sales, rose 5.4 percent during the quarter and they would rise 4 percent for the rest of the year.

Unlike Penney and Kohl's, Macy's also got help from luxury spending's comeback due to the Bloomingdale's chain, which contributes about 10 percent of sales.

Kohl's reported a 1.3 percent same-store sales gain for the first quarter, while Penney's rose 6.4 percent. At Nordstrom Inc , which caters to higher-end shoppers, same-store sales rose 6.5 percent. Kohl's and Nordstrom report results on Thursday, while Penney will report on Monday.

Looking ahead, Macy's raised its sales and profit forecast, saying it expects same-store sales to gain 4 percent for the rest of the year, which would come to 4.3 percent for the whole year, including the first quarter. Macy's had forecast 3 percent at the start of 2011.

As a result, the retailer also raised its fiscal 2011 profit forecast 15 cents per share on both ends of the range and now expects to earn between $2.40 and $2.45, above Wall Street expectations of $2.35, according to Thomson Reuters I/B/E/S.

Its shares rose $1.93, or 7.3 percent, to $28.26. Penney and Kohl's shares rose more modestly, less than 1 percent, while Nordstrom was up 2.2 percent.

SOARING PROFIT

Macy's reported net income of $131 million, or 30 cents a share, for the quarter that ended on April 30, nearly six times higher than the $23 million, or 5 cents, it reported a year earlier. That easily topped the 18 cents Wall Street analysts on average were forecasting

Overall sales in the quarter rose 5.7 percent to $5.9 billion.

Gross margin, which reflects the profitability of the items Macy's sells, slid 0.3 percentage points to 39.1 percent as Macy's dealt with rising cotton costs. But the company has repeatedly said its clout with vendors was mitigating some of that risk.

Inventory levels rose 4.8 percent compared with a year earlier, in line with the sales gains. Swinand said that showed Macy's was still cautious about overstocking, which can force retailers to slash prices if items do not sell.

Macy's, which operates about 850 department stores under its own and the Bloomingdale's names, also doubled its quarterly dividend to 10 cents per share.

(Reporting by Phil Wahba, editing by Maureen Bavdek)

New york city