Best Buy surprises with Q3 sales gain. Stock surges nearly 10 percent.

Best Buy says its revenue edged up in the third quarter, a positive sign for the electronics retailer as the holiday season kicks off. Both revenue and earnings per share beat expectations, and Best Buy stock rose almost 10 percent in premarket trading.

Best Buy says its revenue edged up in the third quarter, a positive sign for the electronics retailer as the holiday season kicks off.

Both revenue and earnings per share beat expectations, and Best Buy stock was up over 7 percent in midmorning trading.

 “In the third quarter, our teams delivered positive comparable sales, improved profitability and continued progress in our Renew Blue transformation," Best Buy CEO Hubert Joly said in a Thursday press release. "This resulted in $9.4 billion in revenue and $0.32 in non-GAAP diluted earnings per share versus $0.18 last year. Operationally, this year-over-year improvement was primarily driven by 0.6% revenue growth and the benefits from our Renew Blue and other SG&A cost reduction initiatives, partially offset by strategic pricing investments and the ongoing competitive pressure on our gross profit rate."

"On the top line, while sales in the NPD-reported Consumer Electronics categories declined 0.2 percent, our strength in televisions, computing, and tablets versus the industry, in addition to our growth in gaming and appliances, drove a Domestic comparable sales increase of 2.4 percent, excluding the 80-basis point estimated benefit associated with the classification of revenue for the new mobile carrier installment billing plans," he continuedDomestic online comparable sales increased 22 percent.”

Best Buy has been cutting costs and revamping stores to help improve results as it faces increased competition from online retailers and discount stores.

In the third quarter, revenue edged up less than 1 percent to $9.38 billion. Analysts expected revenue to decline to $9.11 billion, according to FactSet. Revenue in stores open at least one year, a closely watched performance metric, rose 2.2 percent in the quarter.

Best sellers in the quarter were computers, video games, TVs and appliances, while sales of services, tablets and phones were weaker.

“As Hubert remarked, the sales trends we are seeing in our business as we enter the fourth quarter are encouraging from a top-line perspective," Best Buy executive vice president and CFO said in the release. "But to drive these results, similar to Q3, there are internal and external factors that we believe could put pressure on our operating income rate. The internal factors include: (1) the increased mix of faster growing, but lower-margin products in our revenue; (2) the potential impact of higher incentive compensation, particularly in our retail stores, based on our expected year-over-year improvement in performance; (3) higher growth in our lower-margin online channel; and (4) intensified investments in customer-facing initiatives. The external factors include: (1) an intensely promotional competitive environment; (2) a possible constraint in product availability in recent high-profile product launches; and (3) a potential supply chain disruption related to the West Coast port delays.”