UPDATE 2-Gap Q3 net profit rises, stands by 2008 view

(Adds CEO quotes, details on other retailers, byline)

* Q3 EPS 35 cents vs Street 34 cents

* Q3 revenue $3.56 billion vs Street $3.55 billion

* 2008 outlook reaffirmed

* Shares close down 6 percent to $9.51

By Alexandria Sage

SAN FRANCISCO, Nov 20 (Reuters) - Gap Inc (GPS.N) posted higher quarterly net profit on Thursday, topping Wall Street expectations, helped by lower inventory and cost cutting that boosted margins and offset a decline in sales.

The global apparel retailer, which operates the Gap, Old Navy and Banana Republic chains as well as online shoe seller Piperlime, also stood by its full-year earnings forecast.

Gap shares were unchanged after-hours. They had closed down nearly 6 percent at $9.51 in a broad stock market sell-off.

Net income in its third quarter ended Nov. 1 rose to $246 million, or 35 cents per share, from $238 million, or 30 cents per share, a year earlier.

Sales fell nearly 8 percent to $3.56 billion from $3.85 billion, the San Francisco-based company said.

Analysts, on average, expected earnings of 34 cents on sales of $3.55 billion, according to Reuters Estimates. The company predicted earnings between 33 cents to 35 cents per share.

Gap has been trying to dig itself out of a multiyear sales slump by improving its products and finessing its image and target customer.

But like most U.S. retailers, Gap has been hurt as shoppers cut back on all but the most vital purchases such as food and gasoline.

International sales rose 9 percent in the quarter, but total revenue fell at North American Gap, Old Navy and Banana Republic stores. Gap's online division saw a 15 percent rise in sales.

Same-store sales, a key gauge of financial health measuring sales at stores open at least a year, fell 12 percent in the quarter.