By Nivedita Bhattacharjee

NEW YORK, June 8 (Reuters) - Women's apparel retailer Talbots Inc (TLB.N) reported a better-than-expected quarterly profit and forecast full-year earnings above Wall Street estimates, sending its shares up 2 percent.

Photo: www.talbots.com

Talbots, which is staging a turnaround after struggling with declining sales and a heavy debt burden, has revamped its merchandise to resonate with shoppers in their 30s and 40s and has boosted margins with tighter controls on inventory.

In April, the company completed a financing deal that cut its ties with Aeon Co Ltd (8267.T), its controlling shareholder and Japan's second-largest retailer. The move boosted its liquidity and gave Talbots the means to fund an overhaul of its stores.

During the fiscal first quarter ended May 1, Talbots reduced its outstanding debt by more than 80 percent, to $94.1 million.

The company saw a 21 percent rise in full-price selling and a 17.9 percent cut in inventories in the period, and said gross margins improved significantly.

Talbots' net loss from continuing operations was $7.1 million, or 12 cents per share, compared with a net loss of $18 million, or 35 cents per share, a year earlier.

On an adjusted basis, the company earned 38 cents a share, while analysts on average were expecting 16 cents, according to Thomson Reuters I/B/E/S.

Sales rose 4.7 percent to $320.7 million, and same-store sales, a key measure of retail health, rose 2.4 percent. Analysts had expected sales of $323.1 million.

Talbots, whose rivals include Ann Taylor Stores (ANN.N) and Chico's FAS Inc (CHS.N), stuck to its forecast for a full-year sales rise of 3 percent to 5 percent, and said it expects adjusted earnings of 75 cents to 83 cents a share. Analysts were expecting 73 cents a share.

Talbots shares rose 2 percent to $13.75 in premarket trading. (Reporting by Nivedita Bhattacharjee, editing by Maureen Bavdek and John Wallace)