Michaels Cos. on Thursday raised its earnings guidance for the year as its sales increased 3.8% in the second quarter.

The arts-and-crafts retailer now expects earnings of $1.66 to $1.72 a share, up one cent from its previous view.

For the current quarter, the company expects earnings of 35 cents to 37 cents a share, compared with analyst estimates of 37 cents.

While Michaels dominates the arts-and-crafts retail segment, it faces growing competition from a number of smaller and online-only outlets.

Overall for the quarter ended Aug. 1, Michaels posted a profit of $35.7 million, or 17 cents a share, compared with a year-earlier loss of $48.6 million, or 26 cents a share.

Sales grew to $984 million from $948 million. Comparable-store sales increased by 1.6%, or 2.9% on a constant currency basis.

Analysts polled by Thomson Reuters had forecast 16 cents a share in earnings on revenue of $985 million.

Michaels, which had been taken private in 2006 by a Blackstone Group LP-led consortium of private-equity firms, started trading on Nasdaq a year ago with an offer price of $17 a share. Shares, inactive premarket, have been down about 3% this year through Wednesday's close to $23.92.

Write to Angela Chen at angela.chen@wsj.com

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(END) Dow Jones Newswires

August 27, 2015 07:55 ET (11:55 GMT)

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