NEW YORK, Sept 8 (Reuters) - Women's clothing retailer Talbots Inc (TLB.N) posted lower-than-expected quarterly sales and its shares fell 11.6 percent as efforts to keep inventory lean and preserve margins left it short of items to sell.

Talbots.com

The disappointing sales came even as higher margins helped the company beat Wall Street's earnings expectations and highlight the fine line retailers must tread between making sure they have goods on hand when consumers want to buy but do not have so much that they have to resort to deep discounts.

In the second quarter, the company reduced total inventory by 10.4 percent to $130.3 million.

Sales fell 1.3 percent to $300.7 million, missing analysts' average estimate of $313.9 million. Sales at stores open at least a year fell 1.4 percent.

Talbot's saw competitors become more promotional during the quarter while the company tried to hold to its own calendar for promotional events, Chief Executive Trudy Sullivan said.

Net profit was $941,000, or 1 cent a share, in the second quarter, ended July 31, compared with a year-earlier net loss of $24.5 million, or 45 cents a share.

Excluding one-time items, Talbots earned 14 cents a share, beating analysts' average forecast of 5 cents, according to Thomson Reuters I/B/E/S.

Talbots' shares were down 11.6 percent at $9.82 in premarket trading.

The company has been in a process of turning around its business, which has been hindered by heavy debt and declining sales. It is now trying to offer more fashionable merchandise to its target female customers in their 50s and 60s, while aiming to pull in younger consumers.

Total outstanding debt in the quarter was $37.4 million, a decrease of $459.7 million, or 92.5 percent, from the same period last year.

Looking ahead, Talbots sees full year earnings before items of about 84 cents a share to 92 cents a share, up from a prior profit forecast of about 75 cents a share to 83 cents a share. Analysts were expecting a profit of 83 cents a share.

(Reporting by Dhanya Skariachan; additional reporting by Alexandria Sage; Editing by Lisa Von Ahn, John Wallace, Dave Zimmerman)