(Corrects paragraph 8 to clarify that the company opened 52 new stores this year, not plans to open)

Closeout retailer Big Lots Inc reported better-than-expected quarterly profit, as initial markups and lower freight costs boosted gross margins, and raised its outlook for the holiday fourth quarter.

The retailer, which specializes in sales of excess inventory from home appliances to toys, saw gross margin rates rise 60 basis points in the quarter.

Big Lots also said it will buy back $150 million of common shares, starting immediately.

The company specializes in selling 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.

For the third quarter, net income from continuing operations rose to $30.3 million, or 37 cents per share, from $12.4 million, or 15 cents per share, a year earlier.

On an adjusted basis, the company earned 27 cents a share, while analysts were looking for a gain of 18 cents.

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, declined marginally by 0.2 percent.

The company, which has been signing deals to open stores in better locations as other retailers shut shop, said it opened 52 new stores this year -- two more than initially planned for.

It also cut back on store closures, expecting to shut 30 locations instead of the prior estimate of 40.

For the fourth quarter, Big Lots expects earnings from continuing operations of $1.09 to $1.14 a share -- up from its August forecast of 99 cents to $1.04.

The company expects comparable store sales to rise between 1.5 percent and 2.5 percent for the fourth quarter.

Shares of the company closed at $23.54 Thursday on the New York Stock Exchange.

(Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Gopakumar Warrier)