* First quarter adj profit $0.33/shr vs est $0.20
* Management team turnaround efforts working-analyst
* Expects same store sales to fall in Q2, Q3
* Sees lower demand for electronics, especially mobile phones
* Shares rise as much as 8.5 pct
(Adds details, updates share price)
May 22 (Reuters) - Best Buy Co Inc reported a better-than-expected quarterly profit, showing signs that Chief Executive Hubert Joly's turnaround efforts were progressing and sending the company's shares up as much as 8.5 percent in morning trading.
Since joining in the fall of 2012, Joly has removed layers of management, eliminated hundreds of jobs, closed unprofitable stores and boosted Best Buy's cash reserves in efforts to stem sales declines.
While the company's sales are still falling, the rate of decline has slowed from 29 percent in the fourth quarter of 2012 to a 3.3 percent fall in the first quarter ended May 3.
"The new management team is working to untangle the old knot and set up more profitable pathways to customers," Stifel analyst David Schick said in a note. "We also believe vendors are showing support for BBY's success."
The company posted an adjusted profit of 33 cents per share, which topped the average analyst estimate of 20 cents, according to Thomson Reuters I/B/E/S.
However, rising grocery bills and higher fuel costs in the United States are weighing on consumers' ability to spend on discretionary items such as electronic goods.
Sears Holdings Corp on Tuesday said gross margins in its U.S. business fell 2 percentage points for the quarter due to low demand for home appliances.
Best Buy expects same-store sales to fall in the current quarter and the next on lower demand for many consumer electronics, and especially for mobile phones as shoppers were waiting to buy new models, the company said.
Apple Inc is expected to launch the latest iteration of its iPhone in September and Amazon.com Inc is rumored to unveil its first smartphone in September.
Best Buy's sales at stores open for at least 14 months fell 1.9 percent in the first quarter and the company said it expected same-store sales to fall in the low-single digits percentage range in the second and third quarters as well.
Total revenue fell 3.3 percent to $9.04 billion. Same-store sales in the United States fell 1.3 percent, steeper than the 0.9 percent fall analysts had expected, according to research firm Consensus Metrix.
"We are encouraged that aggressive internal initiatives will persist; however, we are far less optimistic that sales trends will improve substantially any time soon," Oppenheimer & Co analyst Brian Nagel said in a note.
Best Buy's shares were up 5 percent at $26.64 in morning trading on Thursday. They hit a high of $25.90 earlier.
(Editing by Maju Samuel and Savio D'Souza)