UPDATE 2-Cost Plus quarterly loss widens

* Loss $1.11 vs. estimate of $1.14 loss

* Sales down 0.8 percent

* Lower profit forecast for current quarter

* Shares close down 9.6 pct (Adds company comment)

ATLANTA, Nov 20 (Reuters) - Home decor retailer Cost Plus Inc (CPWM.O) reported a wider third-quarter loss on Thursday as consumers spent less in the weak U.S. economy.

The operator of Cost Plus World Market stores cited improvement in customer traffic, but forecast a lower profit from continuing operations for the current quarter.

"Consumers have become increasingly more cautious with their purchases. They are clearly buying less," Cost Plus Chief Executive Barry Feld said during a conference call.

Cost Plus has undergone a three-year restructuring that it has said will help it weather the prolonged housing slump. The company now offers more value-priced goods, with 85 percent of its products under $20.

The net loss was $25.8 million, or $1.17 a share, compared with a loss of $13.9 million, or 63 cents a share, a year earlier.

Excluding an asset impairment charge of $1.1 million for five underperforming stores, the loss came to $1.11 a share, compared with analysts' average estimate of a $1.14 a share loss, according to Reuters Estimates.

Sales fell 0.8 percent to $213 million, below analysts' average estimate of $215.4 million. Sales at stores open at least a year fell 3.4 percent as the average sale fell 3.6 percent to $36.79.

The retailer said it had "ample" liquidity, as credit line borrowings peak at $125 million in November, under the limit of a $200 million credit facility. The company said it now has $75 million available under its credit line.

Cost Plus said it would curb capital spending to $3 million to $5 million next year, from expected levels of $12 million to $13 million this year, to further improve liquidity. It had cash of $3.51 million as of Nov. 1, compared with $3.48 million a year earlier.

Consumers facing declining home values, tighter credit and rising unemployment have cut back on nonessential purchases, pressuring furnishings companies.

Earlier this year, Linens 'n Things filed for bankruptcy protection and is now liquidating stores.

Cost Plus expects profit from continuing operations before interest and taxes in the range of $10 million to $18 million for the fourth quarter, compared with a $20 million profit a year earlier.

The retailer said lower oil prices did not figure in its fourth quarter outlook but that it could see "material benefit" to its cost of goods if those prices stayed at current levels.

The company's shares, which have fallen 74 percent this year, closed down 12 cents at $1.13 on Nasdaq. (Reporting by Karen Jacobs; Editing by Andre Grenon, Bernard Orr)