UPDATE 2-Kohl's gives soft sales, profit forecast for 2013

* Q4 earnings $1.66/shr vs Street view $1.63

* Sees FY same-store sales flat to up 2 pct

* Sees FY earnings $4.15-$4.45/shr vs view $4.56

* Shares down 3.5 pct premarket

Feb 28 (Reuters) - Kohl's Corp reported a lower fourth-quarter profit on Thursday, hurt by markdowns during the holiday season, and forecast full-year earnings that fell short of Wall Street expectations.

The department store chain, which caters to price-sensitive middle-class shoppers, said it expects same-store sales to be flat to up 2 percent this year, following a modest 0.3 percent gain last year.

Shares were down 3.5 percent to $45 in premarket trading.

Kohl's sales forecast is below that of rival Macy's Inc's 3.5 percent and suggests the company does not expect to benefit much from the steep sales decline of its most direct rival, J.C. Penney Co Inc. On Wednesday, Penney reported a 31.7 percent same-store sales decline last quarter.

"Kohl's has a cautious consumer and has a lower income demographic than Macy's," Edward Jones analyst Brian Yarbrough told Reuters.

Kohl's also has comparatively fewer stores in malls compared to Penney, so unhappy Penney shoppers have tended to go to a Macy's or Sears within a mall, rather than drive to a standalone Kohl's store, Yarbrough said.

Kohl's said net income fell to $378 million, or $1.66 per share, from $455 million, or $1.82 per share, a year earlier for the quarter ended Feb. 2. The latest EPS result was 3 cents better than analysts' targets, according to Thomson Reuters I/B/E/S.

Kohl's gross profit margin fell 2.9 points to 36.2 percent of sales, largely because of price slashing in December to lure hesitant shoppers holding out for deals, then again in January to clear shelves to make room for spring merchandise.

"Sales for the fourth quarter developed very late and as a result, came at a cost to profitability," Kohl's Chief Executive Kevin Mansell said in a statement, noting that cost controls had limited the damage.

Kohl's struggled with finding the right level of inventory last year. Some months it kept inventory too lean and ran out of merchandise, losing out on some business, while other months it had too much and ended up slashing prices.

As previously reported, Kohl's comparable sales for the quarter that included the holiday season were up 1.9 percent. At Macy's, they rose 3.9 percent, and at Dillard's Inc, they gained 3 percent.

Kohl's expects a full-year profit for the new fiscal year of between $4.15 and $4.45 per share, while Wall Street projected $4.56 per share, according to Thomson Reuters I/B/E/S.