* Narrows operating loss to 23 mln DKK from 114 mln
* Europe sales improves due to strong demand for B&O speakers
* Cheaper Play brand disappoints -analyst (Adds quotes from CEO, analyst, details)
COPENHAGEN, April 11 (Reuters) - Danish luxury audio equipment and television maker Bang & Olufsen narrowed its operating loss in the third quarter due to improvements in its European business, it reported on Friday.
The company's loss before interest and tax fell to 28 million Danish crowns ($5.21 million) in the three months to end-February compared with a loss of 114 million crowns a year earlier.
"In the third quarter we saw signs of improvement in our European business, which was driven by strong demand for our newly launched speakers in particular and AV (audio visual) products in general," chief executive Tue Mantoni said in the report, adding that he believed the improvements in the European AV business will continue.
B&O's cheaper Play brand, targeted at a younger customer group, saw a sales set-back, and Mantoni said it was due to the focus on AV activities and "too low a level of new product introductions".
Sydbank analyst Soren Lontoft Hansen said that B&O's third quarter results were weaker than he had expected.
"Play is especially disappointing, and I am a bit surprised by that," Lontoft said.
The group repeated its full-year forecast for revenue moderately above the 2012/13 level of 2.81 billion crowns and for earnings before interest and tax to be around the break-even level.
Shares in Bang & Olufsen were 6.9 percent lower at 0712 GMT while the Danish benchmark index was 1.0 percent down.
$1=5.3787 Danish Crowns Reporting by Teis Jensen, additional reporting by Annabella Nielsen; editing by Greg Mahlich and Keiron Henderson