UPDATE 1-99 Cents Only Stores Q1 sales beats Street; shares up

* Q1 sales $332.1 mln v est 316 mln

* Same-store sales in Texas up 23.6 pct in Q1

* Shares up 7 pct in trading after the bell

July 9 (Reuters) - Discount retailer 99 Cents Only Stores NDN.N posted better-than-expected first-quarter sales as more consumers turned to lower-cost alternatives for groceries and other items, sending its shares up 7 percent after the bell.

"We believe that many middle to upper income consumers are coming into our stores for the first time for their household needs due to the recession," Chief Executive Eric Schiffer said in a statement.

For the quarter ended June 27, the Commerce, California-based company's sales rose 9 percent to $332.1 million.

Analysts on average were expecting the company to report sales of $316 million, according to Reuters Estimates.

The company's overall same-store sales increased 7.2 percent in the quarter. Same-store sales at its underperforming Texas stores rose 23.6 percent in the quarter.

In May, the company put-off until August a previously announced decision to exit the Texas market, following a sales improvement there.

Shares of the company were up 20 cents in trading after the bell, after closing at $13.63 Thursday on the New York Stock Exchange. (Reporting by Abhishek Takle in Bangalore; Editing by Anthony Kurian)