By Phil Wahba

NEW YORK(Reuters) - Macy's Inc quarterly
results showed the department store operator boosted sales and
gained market share without relying as much on discounts as its
rivals to get shoppers into stores.

Shares of Macy's rose 5.9 percent after the company posted
better-than-expected earnings and raised its full-year sales
and profit forecasts, helped by inventory management that
protected its margins.

Chief Executive Terry Lundgren said the retailer had gained
market share, citing the "My Macy's" program which gives stores
more leeway to choose merchandise by region, as well as its
focus on exclusive brand lines.

"They've done less discounting. Their gross margins are
telling you that either there are fewer promotions, or the
promotions that they're running are planned," said Sterne Agee
& Leach analyst Ken Stumphauzer.

Macy's was able to woo shoppers despite the threat of a new
dip in consumer spending that has weighed on rivals like J.C.
Penney Co and Dillards Inc.

Cincinnati-based Macy's said second-quarter net income rose
to $147 million, or 35 cents a share, from $7 million, or 2
cents per share, a year earlier.

Analysts on average expected a profit of 29 cents a share,
according to Thomson Reuters I/B/E/S. Sales rose 7.2 percent to
$5.54 billion, beating Wall Street forecasts of $5.5 billion.

Macy's raised its forecast for full-year same-store sales
growth to a range of 4 percent to 4.2 percent. It earlier
expected 3.0 percent to 3.5 percent.

The company also raised its full-year profit outlook by 10
cents a share to a range of $1.85 to $1.90 a share, compared
with Wall Street's average forecast of $1.87 a share.

Macy's shares closed up $1.14 to $20.52 on the New York
Stock Exchange, in a sharply lower stock market. The shares of
retailers J.C. Penney and Kohl's Corp fell 0.9 percent
and 1.3 percent respectively. Dillard's fell 4.23 percent.

Kohl's and Penney report their earnings later this week.

For a graphic on the three chains' same-stores sales see:

GOING LOCAL PAYS OFF

Macy's introduced its "My Macy's" program in 2008, aiming
to reduce the risk of getting stuck with merchandise that
shoppers in a given region don't want. It also aims to ensure
that its stores don't lose revenue by not stocking the items
shoppers are seeking.

"They recognized they had a problem with their merchandise
mix," said Wendy Liebmann, CEO of consulting firm WSL Strategic
Retail. "You cannot have a one-size-fits-all mix."

Every month this year, Macy's has reported superior
same-store sales results to Penney and analysts said "My
Macy's" had a lot to do with that.

"They have a lot of district managers who are closer to the
stores," said Stumphauzer. "As a consequence, the smaller
stores are receiving a lot of attention, and those are the
stores in my opinion that historically performed poorly versus
Kohl's and versus J.C. Penney."

Macy's operates about 800 namesake stores in the United
States and 40 Bloomingdale's stores.

Macy's sales at stores open at least a year rose 4.9
percent, surpassing Wall Street expectations in each of the
three months of the quarter.

Last week, Macy's reported a 7.3 percent rise in July
same-store sales, while Penney and Dillards posted
unexpected declines as they slashed prices to move inventory.
Kohl's posted an increase of 4.1 percent.

Merchandise inventories were virtually unchanged from a
year ago, helping Macy's gross margins rise 0.4 percentage
points to 41.9 percent.

Macy's has redoubled efforts to sell exclusive products,
which make up more than 40 percent of sales and offer better
margins. Last week, the company launched its Material Girl
collection, designed in part by pop star Madonna.

Macy's online sales rose 28 percent and contributed 0.5
percentage points to the same-store sales increase. Its upscale
Bloomingdale's chain, which accounts for about 10 percent of
sales, got a boost from higher-end spending.
(Reporting by Phil Wahba; Editing by Michele Gershberg, Derek
Caney, Lisa Von Ahn, Robert MacMillan, and Carol Bishopric)