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.

Fabric at Jo-Ann Stores Inc

"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.

Sales rose 3.1 percent to $460.0 million.

Analysts were expecting earnings of 11 cents a share, before special items, on revenue of $442.7 million, according to Reuters Estimates.

Shares of the Hudson, Ohio-based company closed at $21.46 Wednesday 27 May on the New York Stock Exchange.

For related alerts double click (Reporting by Renju Jose in Bangalore; Editing by Aradhana Aravindan)