* Q3 loss 16 cents vs Street's 12 cents

* Sales down 4 percent in quarter

* Shares close down 9 percent on Nasdaq

SAN FRANCISCO, Jan 6 (Reuters) - Athletic shoe and apparel retailer Finish Line Inc on Tuesday posted a narrower quarterly net loss despite a decline in sales, helped by lower expenses and inventory, and more shares outstanding.

But results fell below Wall Street expectations.

The net loss in the company's third quarter from continuing operations was $8.8 million, or 16 cents per share, compared with $13.8 million, or 29 cents per share, a year earlier.

There was a 14 percent increase in shares outstanding in the quarter compared with the year-ago period.

Analysts, on average, had been expecting a loss of 12 cents per share, according to Reuters Estimates.

Sales fell 4 percent to $256.9 million from $268.7 million, said the company, which operates the Finish Line and Man Alive chains.

In November, Finish Line's chief executive, Alan Cohen, retired and was replaced by Glenn Lyon, while Chief Financial Officer Kevin Wampler left to become CFO of Dollar Tree Inc.

Mall-based athletic shoe retailers have been hit by lower sales as U.S. consumers have cut back on apparel and shoe purchases largely viewed as discretionary in the recession.

The Indianapolis-based retailer said inventories in the quarter fell 12 percent per square foot, while selling, general and administrative expenses fell by nearly 3 percent.

Shares closed down 9 percent at $5.38 on the Nasdaq. Shares are down 57 percent since reaching a 52-week high in September. (Reporting by Alexandria Sage; Editing by Phil Berlowitz)