UPDATE 2-Jo-Ann Stores Q4 net up; sees 2009 profit below Street

(Adds details, updates share movement)

March 12 (Reuters) - Fabric and crafts retailer Jo-Ann Stores Inc (JAS.N: Quote, Profile, Research) posted a 7 percent rise in quarterly profit due to lower expenses, but forecast fiscal 2009 earnings below market estimates, sending shares down about 5 percent.

The company, which offers an array of items for home decorating, posted fourth-quarter net income of $27.5 million, or $1.10 a share, compared with $25.8 million, or $1.05 a share, a year ago.

Net sales fell 2.5 percent to $585.9 million for the quarter ended Feb. 2, 2008, while same-store sales increased 3.3 percent.

Selling, general and administrative expenses fell to $202.1 million from $215.4 million in the prior-year period.

Analysts on average had expected the company to earn $1.09 a share, excluding exceptional items, on revenue of $595.2 million, according to Reuters Estimates.

"Looking ahead, economic environment has created some uncertainty for fiscal year 2009...," Chief Executive Darrell Webb said in a conference call.

For 2009, the Hudson, Ohio-based company expects earnings of 70 cents to 85 cents a share. Analysts were expecting 87 cents.

The company sees same-store sales growth of 1 percent to 3 percent and capital expenditures of $50 million to $55 million for the year.