UPDATE 2-Christopher & Banks sees surprise Q3 profit, shares up

* Sees Q3 EPS $0.19-$0.21 vs est -$0.05/shr

* Sees Q3 revenue $132 mln vs est $123.9 mln

* Sees Q3 same-store sales down 8.4 pct

* Sees Q4 losses continuing

* Shares up 22 pct in after-market trade (Recasts; adds details, updates share movement)

Dec 10 (Reuters) - Women's apparel retailer Christopher & Banks Corp (CBK.N) forecast a surprise third-quarter profit, helped by cost cuts and higher gross margins, sending its shares up 22 percent in trading after the bell.

For the third quarter, the retailer sees a 500 basis points increase in gross margins.

The company said it expects third-quarter earnings of 19 cents to 21 cents a share and revenue of about $132 million.

Analysts on average were expecting a loss of 5 cents a share on revenue of $123.9 million, according to Thomson Reuters I/B/E/S.

The company expects selling, general and administrative expenses to fall about $7 million in the quarter.

Inventory is also expected to be down over 20 percent, the retailer said in a statement.

The company, which has reported fourth-quarter losses for the past several years, given that it includes two post-holiday months, said it expects this trend to continue in the current quarter as well.

The company, which caters to baby boomers, said it sees a very promotional holiday season.

It saw same-store sales fall 8.4 percent during the quarter.

Shares of the Plymouth, Minnesota-based retailer touched a high of $7.37 in post-market trade. They closed at $6.02 Thursday on the New York Stock Exchange. (Reporting by Shobhana Chadha in Bangalore; Editing by Anil D'Silva)