UPDATE 2-Bon-Ton shares surge on Q3 results, FY outlook

* Q3 loss/shr $0.24 vs $0.86 year ago * Q3 sales down 3 pct to $703.9 mln * Narrows FY loss view to $1.20-$2.30 (Adds conference call details, updates share closing)

Nov 19 (Reuters) - Bon-Ton Stores Inc (BONT.O) posted a narrower quarterly loss helped by lower expenses and tighter inventory management, and slashed its full-year loss view, sending shares up 18 percent.

This is the second time in a month that the department store operator, which runs the Elder-Beerman, Boston Store and Carson Pirie Scott chains, has improved its full-year forecast.

On Oct. 26, Bon-Ton said it expects its full year loss to come in at the lower end of its earlier expectation of a loss of $2.50 to $3.70 a share, citing improving sales trends in October.

The company now sees a loss of $1.20 to $2.30 a share for 2009.

"We have enough inventory in the right places to really make our fourth-quarter sales and even beat them," Bon-Ton's merchandising chief, Tony Buccina, said on a conference call with analysts.

The company, which noted positive same-store sales of 3.1 percent during the month of October, said the improved sales trends and improvements in the number of store transactions were encouraging signs for the fourth-quarter.

For the third quarter, gross margin increased 200 basis points to 37.6 percent, boosted by well-managed inventory levels and reduced levels of clearance merchandise, the company said in a statement.

Bon-Ton reported a third-quarter net loss of $4.2 million, or 24 cents a share, compared with a loss of $14.3 million, or 85 cents a share, a year ago.

Net sales fell 3 percent to $703.9 million.

York, Pennsylvania-based Bon-Ton's shares closed up 18 percent at $12.66 Thursday on Nasdaq. (Reporting by Viraj Nair in Bangalore; Editing by Pradeep Kurup)