By Andria Cheng

Retail stocks opened higher Thursday, led by Best Buy Co., after the largest U.S. electronics retailer posted a smaller-than-expected decline in its fourth-quarter profit and gave an outlook that topped Wall Street expectations.

Best Buy (BBY) shares surged 14% to $37.97. The Minneapolis-based retailer, expected to benefit from the demise of its smaller rival Circuit City Stores Inc., said profit dropped 23% after it sold more profitable items such as cell phones and warranty services to help make up for consumers' broad cutbacks in discretionary spending.

Still, Best Buy isn't without competition of its own as retailers such as Wal-Mart Stores Inc. (WMT) expand their footprint in electronics. Wal-Mart, part of the Dow Jones Industrial Average, saw its shares up 1.3% to $52.39.

Smaller electronics retailer RadioShack Corp.'s (RSH) shares were up 5.2%. Staples Inc. (SPLS), which sells some electronics products and computers, saw its shares up 5.1%.

Among other gainers, Nordstrom Inc. (JWN) shares rose 4.2%.

The S&P Retail Index (RLX) rose 2.6% to 296.16 even after the Commerce Department reported that the fourth-quarter U.S. economy contracted at a more-than previously-estimated 6.3%, on hope that the worst may be behind for the U.S. economy.

Meanwhile, the Labor Department said the number of people collecting state unemployment benefits reached yet another new record, jumping 122,000 to a seasonally adjusted 5.56 million, showing the job market's considerable strain.

-Andria Cheng; 415-439-6400; AskNewswires@dowjones.com