UPDATE 2-HSNi profit beats, sees uptick in discretionary buys

* Q3 EPS $0.29 vs est $0.18

* Says inventory down 18 pct

* Operating expenses down 10 pct

* Sees growing demand for discretionary products

* Shares up as much as 10 percent (Recasts; adds CEO comments, details, updates share move)

By Shobhana Chadha

BANGALORE, Nov 12 (Reuters) - HSN Inc's (HSNI.O) third-quarter profit beat market expectations, helped by improved margins and leaner inventories for its namesake brand, and said it was seeing an uptick in demand for discretionary products in the same brand category.

Shares of the teleshopping and e-commerce operator rose as much as 10 percent to touch an intra-day high of $17.05, but shed some of those gains later, and were trading up $1.04 at $16.56 Thursday afternoon on Nasdaq.

Adjustments in product mix at the company's HSN segment -- which makes up for nearly two-third of net sales -- helped drive unit growth up 13 percent during the quarter, with sterling silver and fashion jewelry sales jumping 30 percent, Chief Executive Mindy Grossman told Reuters.