Barnes & Noble

(BKS) - Get Report

widened its loss in the first quarter, as consumers cut back on books and music purchases and turned to digital outlets. The company, however, significantly outperformed analysts' expectations and, in response, raised its full-year outlook.

The news sent shares up 7% to $25.50 in pre-market trading.

The book seller recorded a loss of $2.7 million during the quarter, or 5 cents a share, compared with a loss of $2.2 million, or 4 cents, a year earlier.

Barnes & Noble has been struggling with weak demand as consumers cut back on discretionary music and book purchases. The company has also been losing market share to discount booksellers like

Amazon.com

(AMZN) - Get Report

.

Excluding one-time costs, the company lost 4 cents a share, managing to beat analysts' guidance of a loss of 15 cents.

Revenue fell 4% to $1.11 billion, while same-store sales sank 5.7%.

Aside from already cutting jobs and reducing costs, the company also acquired

Fictionwise

, an e-book retailer, in the effort to capture the growing market for electronic books.

Barnes & Noble raised its full-year profit estimate on the better-than-expected results. The company now expects 2009 earnings in the range of $1.10 to $1.40 a share, up from a previous estimate of 95 cents to $1.25 a share. Second quarter earnings are expected to fall between 5 cents and 15 cents a share.

The company also announced a quarterly cash dividend of 25 cents per share, payable on June 30 for stockholders of record at the close of business on June 9.

Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed. AP contributed to this report.