UPDATE 1-Jo-Ann Stores Q1 results beat Street; backs '10 view

* Q1 adj EPS $0.30 vs est of $0.11

* Sales up 3.1 pct to $460.0 million

* Same-store sales rise 1 pct

* Sees FY10 EPS $0.70-$0.85

May 27 (Reuters) - Fabric and crafts retailer Jo-Ann Stores Inc (JAS.N) posted first-quarter results that topped market estimates as gross margins improved, helped by reduced product and freight costs, and reaffirmed its fiscal 2010 outlook.

"During the first quarter of fiscal 2010, Jo-Ann Stores delivered solid operating results as we grew sales, expanded margins, improved earnings and continued to reduce our debt," Chief Executive Darrell Webb said in a statement.

Looking ahead, Jo-Ann said it sees fiscal 2010 earnings of 70 cents a share to 85 cents a share, excluding gains on debt purchases.

The company, which sells fashion and decorator fabrics and crafts, also said it expects same-store sales to fall 2 percent to 4 percent in the year.

In the latest first quarter, the company earned $8.6 million, or 33 cents a share in the quarter, compared with $3.0 million, or 12 cents a share, a year earlier. Excluding items, net income was 30 cents a share.