The company, whose share of the U.S. e-book market stands at between 25 percent and 30 percent, said Nook sales had suffered due to lower selling prices and because it could not meet demand for the Nook that allows readers to read in the dark.

Sales of high-margin digital content through Nook rose 46 percent in the first quarter ended on July 28, the company said, but overall Nook sales, including devices, rose only slightly to $192 million from $191.4 million a year earlier.

"While digital content sales rose 46 percent, we are discouraged that Nook device unit sales plunged significantly despite price cuts," S&P Capital IQ analyst Michael Souers wrote in a note to clients. "We think competitive pressures will continue to drive thinning gross margins in that segment."

Shares of Barnes & Noble were down 1 percent at $12.23 in midday trading.

The largest U.S. bookstore chain said Nook losses before interest, taxes, depreciation and amortization had increased to $57 million from $51 million as it took down prices on its devices and continued to make investments.

The company, which has poured hundreds of millions of dollars into the development of the Nook, said on Monday that it would introduce the device in Britain.

Earlier this month, Barnes & Noble lowered the prices on some of its Nook devices to compete in the tablet market against rivals such as Apple Inc (AAPL.O) and Amazon.com Inc (AMZN.O).

The company reported a 4.6 percent rise in comparable-store sales, or a 7.6 percent increase excluding Nook.

Barnes & Noble said the bookstores had benefited from market consolidation, including last year's closing of Borders Group Inc, and strong sales of the "Fifty Shades" erotic book trilogy.

"We continue to be encouraged by the performance of our physical brick-and-mortar business," Chief Executive Officer William Lynch said on a conference call with analysts. "In the beginning of last year, we stated that we expected our stores to benefit from industry consolidation, shrinking the number of places for readers to shop a selection of books."

Total revenue increased 2.5 percent to $1.5 billion.

Barnes & Noble said its net loss for the quarter had narrowed to $41 million, or 78 cents per share, from $56.6 million, or 99 cents a share, a year earlier.

Analysts on average were expecting a loss of 98 cents a share, according to Thomson Reuters I/B/E/S.

(Reporting by Phil Wahba in New York and Nivedita Bhattacharjee in Chicago; Editing by Jeffrey Benkoe and Lisa Von Ahn)

• A Permanent Economic Emergency