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UPDATE 1-Best Buy revenue misses estimates as customers shift online

(Adds details; updates shares)

Aug 26 (Reuters) - Best Buy Co Inc, the largest U.S. specialty retailer of consumer electronics, reported lower-than-expected quarterly revenue for the third straight quarter, citing a drop in traffic in its stores as more people shop online.

Best Buy, whose shares were down 4 percent in premarket trading, also said it expected operating margins to remain under pressure due to higher sales of lower-margin items, continued industry softness and greater discounting in Canada and China.

"... Industry-wide sales are continuing to decline in many of the consumer electronics categories in which we compete," Chief Financial Officer Sharon McCollam said in a statement.

Sales of consumer electronics such as TVs and desktop and notebook computers fell 2.5 percent industrywide in the quarter, the company said, citing NPD Group's Weekly Tracking Service.

The company also said it expected continued softness in mobile phone sales ahead of the release of new models.

Apple Inc is expected to launch its latest iPhone next month.

Best Buy's revenue fell 4 percent to $8.89 billion in the second quarter ended Aug. 2. Analysts on average had expected $8.99 billion, according to Thomson Reuters I/B/E/S.

Same-store sales fell 2.7 percent, with U.S. same-store sales slipping 2 percent.

Net income attributable to shareholders fell to $146 million, or 42 cents per share, from $266 million, or 77 cents per share, a year earlier.

The year-earlier profit included a gain of $229 million from legal settlements.

Excluding items, the company earned 44 cents per share from continuing operations, beating the average analyst estimate of 31 cents.

Best Buy's shares were trading at $30.78 before the bell. Up to Monday's close, the stock had fallen 20 percent since the start of the year.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Joyjeet Das)