NEW YORK (TheStreet) -- Best Buy's ( BBY) third-quarter earnings, though ahead of Wall Street forecasts, were overshadowed by thinning gross margins and tempered expectations for the upcoming holiday shopping season. Shares tumbled 5% to $41.40 in premarket trading.

For three months ended Nov. 2, the electronic retailer said its gross margin rate fell 60 basis points in the U.S. to 23.6% and management expects an equally depressed figure over the all-important holiday season quarter.

"If our competition is in fact more promotional in the fourth quarter, we will be too and that will have a negative impact on our gross margin," said Chief Financial Officer Sharon McCollam in a statement. "We too are opening our stores at 6:00 pm on Thanksgiving Day and not closing them until late evening on Black Friday. This requires increased promotional offers and an incremental investment in store payroll."

Expectations were high for the world's largest electronics chain after the implementation of a strict cost-cutting and turnaround regime dubbed "Renew Blue." For the quarter, the company reported net income of 18 cents a share, beating estimates by a nickel. Revenue of $9.36 billion was higher than the $9.35 billion analysts surveyed by Thomson Reuters had expected.

The company managed to reverse a $10 million loss suffered in the year-ago quarter, with net earnings of $54 million boosted by $115 million in cost reductions.

Comparable-store sales in the U.S. rose 1.7% and fell 6.4% internationally. Online continues to be a savior with same-store sales up 15.1% during the quarter.

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