UPDATE 2-Best Buy profit beats, set to cut costs more; shares jump

Feb 27 (Reuters) - U.S. retailer Best Buy Co Inc reported a better-than-expected quarterly profit on Thursday and announced more aggressive cost cuts this year, sending its shares up nearly 6 percent in morning trading.

The results heartened investors who had been concerned about profits being squeezed during the fourth quarter, the most heavily promoted and discounted holiday-shopping season since the recession. Shares jumped 5.7 percent to $27.29 on the New York Stock Exchange.

Best Buy had slashed prices throughout the holidays to thwart competition from Wal-Mart Stores Inc, Amazon.com Inc and other chains, and had last month warned of a bigger-than-expected drop in quarterly operating margins.

"The quarter was less bad than everyone expected," said BB&T Capital Markets analyst Anthony Chukumba, who was encouraged by Best Buy's efforts to court online shoppers and rein in costs.

The world's largest consumer electronics chain said it would more aggressively cut annualized costs, by about $1 billion. It originally planned to cut costs by $725 million in North America, a target it has exceeded by $40 million.

Under Chief Executive Hubert Joly, a turnaround expert, Best Buy has stripped away layers of management, cut jobs and costs, shuttered unprofitable stores and boosted cash by selling its stake in a European joint venture with Carphone Warehouse Group Plc.

Still, Chukumba said the company has further fat to cut and expects the retailer to work on trimming corporate overhead expenses and personalizing its marketing.

Earlier this week, the New York Post cited an inside source as saying the retailer could lay off more 2,000 managers. Best Buy declined comment on the report.

The company earned a net $310 million, or 88 cents a share, from continuing operations in the fourth quarter ended Feb. 1. That follows a net loss of $461 million, or $1.36 a share, a year earlier.

Excluding special items, it earned $1.24 a share. The special items included restructuring and asset impairment charges and the tax impact of Best Buy Europe sales.

Analysts, on average, expected a profit of $1.01 a share excluding items, according to Thomson Reuters I/B/E/S.

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

Comparable store sales, comprising revenue at stores, websites and call centers operating for at least 14 full months, fell 1.2 percent.

The company, which recently started shipping directly from its 1,400 stores to compete with rivals Amazon and Wal-Mart, said comparable online sales grew 25.8 percent at its domestic unit.