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Barnes & Noble’s introduction of Nook e-book readers has helped the company offset the slump in demand for printed books in the U.S.

Barnes & Noble Inc. said its first-quarter loss narrowed as the bookseller was boosted by more traffic through its shops, sales of e-books and demand for the Fifty Shades of Grey erotic trilogy.

In the three months to July 28 the company reported a net loss of $41-million (U.S.), or 78 cents per share, compared with a loss of $56.6-million, or 99 cents per share, a year earlier. Analysts had forecast a loss of 98 cents.

"During the first quarter, we continued to see improvement in both our rapidly growing Nook business, which saw digital content sales increase 46 per cent during the quarter, and at our bookstores, which continue to benefit from market consolidation and strong sales of the Fifty Shades series," said William Lynch, chief executive.

Barnes & Noble's introduction of Nook e-book readers has helped the company offset the slump in demand for printed books in the U.S. while establishing a sizable presence in the U.S. e-book market.

However the arena is still dominated by Amazon, which has 60 per cent or more of the U.S. e-book market, while Barnes & Noble estimated its own share at 25 to 30 per cent.

Total Nook revenues held steady at $192-million as a 46-per-cent rise in digital content sales made up for a decline in revenues from device sales. The company has lowered average selling prices to compete with retailers such as Amazon.

The company announced on Monday it would launch the Nook in the U.K. this October, as part of the company's push to expand its e-book business internationally.

The company said it continued to benefit from the liquidation of Borders bookstores. Total sales at the company edged 2.5 per cent higher from $1.42-billion last year to $1.45-billion.

Barnes & Noble book shop and online sales rose 2 per cent to $1.12-billion while same-store sales – a measure of stores open at least a year – increased by 4.6 per cent.

Gross margin improved to 28.5 per cent from 27.3 per cent.

In spite of the better than expected numbers, shares in Barnes & Noble declined 1.1 per cent to $12.22 by midday in New York, as investors and analysts questioned the future of the e-reader business.

Microsoft in April agreed to invest $300-million in exchange for a minority stake in Barnes & Noble's Nook and university book shop businesses. The bookseller is creating an app that will enable Microsoft customers to access the retailer's e-books and other digital content, but Barnes & Noble has not released any further details.

Additionally, analysts such as John Tinker at Maxim Group said the company needed a partner on the manufacturing side.

"Barnes & Noble can't compete on the innovation front with the giants. As long as some separation between tablet computers and e-readers still exists the company will be fine, but if you have a smaller version of the Apple iPad out there it isn't going to help Barnes & Noble at all," he said. "It needs the likes of a Hewlett-Packard or a Dell, that would like to get better access to retail and content, to invest."

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