UPDATE 3-Overstock profit beats expectations; shares rise

* Q4 EPS 4 cents vs Wall St view of 3 cents loss per share

* Q4 revenue $255.86 mln, down 13 pct

* Shares gain nearly 21 percent (Adds detail from conference call, updates share price)

NEW YORK, Jan 30 (Reuters) - Overstock.com Inc (OSTK.O) posted a small quarterly profit on Friday instead of an anticipated loss, as the online retailer avoided heavy discounts during a competitive holiday shopping season, pushing its shares up nearly 21 percent.

For the fourth quarter, net profit was $1.01 million, or 4 cents per share, compared with a loss of $6.47 million, or 27 cents per share, a year ago.

Analysts, on average, expected a loss per share of 3 cents, according to Reuters Estimates.

Revenue fell 13 percent to $255.86 million.

Overstock sells excess inventory of clothing, accessories, furniture and other items through its website.

Its results come a day after online retailer Amazon.com (AMZN.O) reported higher fourth-quarter earnings, boosted by robust holiday sales, and forecast first-quarter sales above expectations.

Amazon's upbeat outlook and sales performance gave investors some relief from a stream of disappointing forecasts issued by major consumer companies, like Wal-Mart Stores Inc (WMT.N) and eBay Inc (EBAY.O), in the past month.

U.S. retailers endured their toughest holiday season in nearly four decades as a year-long recession, slumping housing market, tight credit and rising unemployment hampered consumers' ability to spend.

Overstock said that during the just-completed holiday season, retailers began liquidating their own merchandise through massive promotions and discounting.

"We chose not to chase revenues through marketing and heavy promotion: the result was a profitable quarter for us in what has been one of the most dreadful retail environments in recent history," said Chief Executive Patrick Byrne in a statement.

Spending on marketing decreased 40 percent in the quarter.

Overstock said it expects "a glut of supply" in the near term as retailers go out of business and close stores. It recently leased a large warehouse in Salt Lake City, where the company is headquartered.

Still, Byrne noted the push and pull between retailers anxious to reduce inventory and consumers unwilling to spend.

"My sense is there are a lot of folks who are just cleaning out their supply chain right now in anticipation of closing doors or closing 30 percent of their doors," Byrne said, speaking with analysts.

"On the other hand ... the consumers are sitting on their wallets."

Overstock shares, which as of Thursday's close are down 10 percent from a year ago, were up $2.02, or 20.7 percent, to $11.78 in early afternoon trade on Nasdaq. (Additional reporting by Alexandria Sage; Editing by Jeffrey Benkoe and Tim Dobbyn) (See here for "Shop Talk" -- Reuters' retail and consumer blog)