UPDATE 3-Overstock loss less than expected; shares jump

(Adds analyst comment)

NEW YORK, April 18 (Reuters) - Overstock.com Inc (OSTK.O: Quote, Profile, Research) reported a much narrower-than-expected quarterly loss on Friday as the online retailer benefited from higher sales and a bigger gross margin, sending shares up 25 percent.

The company reported a net loss of $3.9 million, or 17 cents per share, for the first quarter, versus a loss of $21.4 million, or 91 cents per share, a year earlier.

Analysts, on average, expected a loss of 31 cents per share, according to Reuters Estimates.

Total revenue rose 27 percent to $200.7 million.

"We returned to above industry-level revenue growth this quarter, capping off our turnaround plan," Chief Executive Patrick Byrne said in a statement.

Stifel Nicolaus analyst Scott Devitt said the results were "meaningfully above" his expectations and subsequently raised his estimates for 2008 and 2009.

Overstock shares were up $4.19 at $18.19 in midday trading on the New York Stock Exchange. (Reporting by Martinne Geller; editing by Jeffrey Benkoe and Steve Orlofsky)