UPDATE 2-Dillard's posts surprise 1st-quarter profit

* Q1 shr profit 9 cents excluding item

* Wall St view loss 18 cents

* Q1 sales down 12 pct to $1.474 billion

* Shares up 11 pct (Adds analyst estimates, share price)

SAN FRANCISCO May 15 (Reuters) - Dillard's Inc (DDS.N) surprised Wall Street by reporting a quarterly profit as the department store chain slashed costs and inventories, helping to offset slumping sales and its shares rose 11 percent.

Dillard's on Friday said net income for the fiscal first-quarter ended May 2 rose to $7.7 million, or 10 cents per share, from $2.7 million, or 4 cents per share, a year earlier.

Excluding a gain of 1 cent per share, it reported earnings of 9 cents per share. That compared with analysts' average estimate for a loss of 18 cents per share, according to two analysts polled by Reuters Estimates.

Net sales fell to $1.474 billion from $1.676 billion.

"Our aggressive efforts with regard to inventory management, expense reduction and cash conservation clearly benefited us during the quarter," said Dillard's Chief Executive Officer William Dillard II, in a statement.