UPDATE 3-Big Lots cuts Q4 outlook, shares down

* Q3 EPS $0.23 vs est $0.24

* Cuts Q4 EPS from cont ops view to $1.36-$1.42

* Cuts Q4 comps view to flat to up 2 pct

* Shares down as much as 5 pct (Recasts, adds details, analyst comment)

By Mihir Dalal

BANGALORE, Dec 3 (Reuters) - Close-out retailer Big Lots Inc (BIG.N) cut its outlook for the crucial holiday quarter, in the face of strong competition from rivals especially in the toys category, and a rise in debit card processing fees, sending its shares down 5 percent.

Big Lots' outlook cut comes at a time when more U.S. shoppers swapped discounters for department stores and clothing shops on the Black Friday weekend -- the traditional start of the holiday shopping season. [ID:nN28204931]

"There's a lack of confidence in its fourth-quarter guidance considering the challenging competitive environment," Wedbush Securities analyst Joan Storms said.

The Columbus, Ohio-based company, which competes with larger firms such as Dollar General Corp (DG.N) and Wal-Mart Stores Inc (WMT.N), has been hurt by aggressive discounting and promotions by rivals.

Additionally, competition has intensified in the toys category, which contributes a sizeable amount to Big Lots' fourth-quarter sales, as consumers spend more on Christmas gifts.

In the past few months, Toys R Us Inc [TOY.UL] has announced plans to open 600 temporary stores for the U.S. holiday shopping season and Wal-Mart has given discounts on toys.

Big Lots, which stocks its stores with merchandise that has been overproduced, discontinued or rejected by other retailers, expects fourth-quarter comparable-store sales in a range of flat to 2 percent growth. [ID:nASA016VO]

Big Lots' outlook is in contrast to the November sales posted by U.S. retailers -- the best in four years, helped in part by Black Friday sales. [ID:nN02149928]

The National Retail Federation has forecast a gain of 2.3 percent in retail sales for the November-December holiday period, excluding online sales.

Shares of the company, which have risen 7 percent this year, were down 3 percent at $30.16 on Friday morning on the New York Stock Exchange. (Reporting by Mihir Dalal in Bangalore; Editing by Prem Udayabhanu, Editing by Roshni Menon)