August 18 - Children's Place Retail Stores Inc posted a smaller-than-expected quarterly loss as smartly managed inventories reduced the need for discounts, prompting the retailer to raise the lower end of its full-year profit forecast.

The christening collection of the brand.

Children's Place, which competes with chains like Target Corp and Gap Inc's Old Navy, caters to households with a median annual dual income of about $70,000. These shoppers are still under pressure and looking for bargains.

While Children's Place had fewer discounts, rivals were highly promotional, hurting sales at the retailer. Sales slipped to $343.5 million from $345.3 million last year. However, gross margins rose to 33.6 percent compared to 32.9 percent as retail prices, on an average, rose.

Children's Place, which sells clothes for kids, posted a loss of $9.8 million, or 38 cents a share, compared with $8.2 million, or 30 cents a share last year.

Analysts, on average, were expecting the Secaucus, New Jersey-based company to lose 39 cents a share, on sales of $356.6 million, according to Thomson Reuters I/B/E/S.

"Our strategy to significantly reduce the amount of unproductive inventory in our stores resulted in lower mark-downs and solid margin expansion during the quarter, despite higher product costs," Chief Executive Jane Elfers said in a statement.

The company now expects to earn between $3.13-$3.25 a share for the year, compared to its previous expectations of $3.10-$3.25 a share.

The company also said it expects margins in the third quarter to keep growing despite economic uncertainties. The third quarter will take into account sales in the back-to-school season, one of the two key selling seasons for retailers in the United States.

Children's Place shares closed at $40.59 on Wednesday on Nasdaq.

(Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Saumyadeb Chakrabarty, Viraj Nair)