Big Lots Inc's quarterly profit missed market expectations by a penny as the close-out retailer spent more to prepare for the holiday season, and the company cut its outlook for its crucial fourth quarter.

Big Lots, which specializes in sales of excess inventory, expects fourth quarter earnings from continuing operations of $1.36-$1.42 a share, compared with its prior outlook of $1.41-$1.45 a share.

Investments made to open new stores, refresh existing stores, and prepare our business for the all-important holiday season along with softer third quarter sales results caused our expenses to grow at a faster rate than sales, the company said in a statement.

For the third quarter ended October 30, the company posted net income of $17.7 million, or 23 cents a share, compared with $30.3 million, or 37 cents a share, a year ago.

Net sales rose 2 percent to $1.06 billion.

Analysts on average were expecting earnings of 24 cents a share, according to Thomson Reuters I/B/E/S.

Shares of the company, which have risen 7 percent this year, closed at $31.09 Thursday on the New York Stock Exchange.

(Reporting by Mihir Dalal in Bangalore;Editing by Prem Udayabhanu)