CHICAGO (Reuters) - Closeout retailer Big Lots Inc <BIG.N> posted a better-than-expected quarterly profit, aided by lower freight costs, and raised its outlook for the holiday fourth quarter, sending its shares up more than 14 percent.

The retailer, which specializes in sales of excess inventory from home appliances to toys, also said it would immediately start buying back $150 million of common shares.

Big Lots, which shut down its small Internet operation during the third quarter, sells merchandise that others cannot. When manufacturers are left with extra inventory due to a discontinued line or a change in packaging requirements, they call Big Lots, which will buy the merchandise and sell it in its stores at discounted rates.

It has been somewhat insulated from the downturn as shoppers seek its low prices on food or paper towels.

The better-than-expected results came a day after many retailers posted much weaker-than-anticipated November sales as shoppers were keenly focused on bargains.

Shares of Big Lots soared 14.7 percent to $27 in early morning trading on the New York Stock Exchange.

While consumers have been "very stingy" on discretionary purchases, the home category is actually one of the best performers so far in the fourth quarter, Chief Executive Steve Fishman said on a call with analysts.

Big Lots also introduced a loyalty-card program to offer discounts to frequent shoppers during the quarter, which more than 600,000 have already signed up for, Fishman said.

Early sales of Christmas seasonal merchandise, such as decorations, were tough in October, but sales of those items are up so far in the current fourth quarter, he said.

PROFIT JUMPS MORE THAN EXPECTED

Net income in the third quarter ended on October 31 rose to $30.3 million, or 37 cents per share, from $12.2 million, or 15 cents per share, a year earlier.

On an adjusted basis, the company earned 27 cents a share from continuing operations, topping analysts' average forecast of 18 cents per share, according to Thomson Reuters I/B/E/S.

Gross margin rates rose 60 basis points in the quarter.

Big Lots' third-quarter sales rose 1.3 percent to $1.04 billion, while same-store sales, or sales at its locations open at least two years, fell 0.2 percent.

The company, which has been signing deals to open stores in better locations as other retailers close their doors, said it opened 52 new stores this year -- two more than initially planned for. It is also cutting back on closing stores, and now plans to shut just 30 locations this year instead of 40.