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UPDATE 1-Cost cuts boost Best Buy quarterly profit, shares surge

Feb 27 (Reuters) - Best Buy Co Inc reported a better-than-expected quarterly profit Thursday on lower expenses and said it was running ahead of plan in terms of cutting costs, sending its shares up 6 percent in premarket trading.

The profit in the fourth quarter, during one of the most heavily promoted and discounted holiday-shopping seasons since the recession, boosted Best Buy's shares by 6 percent to $27.35 in trading before the bell on the New York Stock Exchange.

Net earnings from continuing operations were $310 million, or 88 cents a share, in the fourth quarter ended Feb. 1, compared to a net loss of $461 million, or $1.36 a share, a year earlier. Excluding special items, the company earned $1.24 a share.

Analysts on average were looking for a profit of $1.01 a share, according to Thomson Reuters I/B/E/S.

Sales fell 3 percent to $14.47 billion, missing analysts' average estimate of $14.66 billion.

Best Buy had last month warned of a bigger-than-expected decline in quarterly operating margins after intense discounting by rivals forced it to discount more as well during the holidays.

Under Chief Executive Hubert Joly, who took the reins of the company in the fall of 2012, Best Buy has removed layers of management, eliminated hundreds of jobs, closed unprofitable stores and boosted cash by selling its stake in a European joint venture with Carphone Warehouse Group Plc.

So far, he has taken out $765 million in annualized costs, the company said on Thursday, exceeding its original cost reduction goal of $725 million.