Bookseller Borders Group Inc reported a smaller-than-expected loss that beat Wall Street estimates as cost cuts offset a protracted slump in book sales.

Borders, which last year struggled with liquidity issues and has had to lay off workers and cut costs aggressively, cautioned such measures can only go so far.

We know that we cannot save our way to prosperity, said Chief Executive Ron Marshall in a statement. Our long-term success will come from doing a much better job of driving sales and that's where our focus is right now.

Shares of Borders, which rose 11 percent in regular trading ahead of the earnings report, pushed nearly 13 percent higher in late trading before falling back near the $2.57 close on the New York Stock Exchange.

The stock has been steadily rising in the past two months after hitting a low of 35 cents in December.

Borders' net loss for its fiscal first quarter ended May 2 was $86 million, or $1.44 per share, compared with a loss of $31.7 million, or 53 cents per share, a year earlier.

The loss in the most recent quarter included $1.17 per share of non-operating charges, including fair value adjustments, severance, depreciation and amortization.

But the loss from continuing operations of 27 cents per share was better than the 50-cent loss expected on average by analysts, according to Reuters Estimates.

Total revenue fell 11.6 percent to $650.2 million from $735.8 million, the company said.

Comparable store sales for the first quarter fell by 13.5 percent at Borders superstores and declined 5.5 percent at Waldenbooks.

The second-largest brick-and-mortar bookseller behind Barnes & Noble Inc , Borders also competes with online seller Inc .

Borders said it had cut its debt by $266 million to $325.9 million at the end of the first quarter, representing a 45 percent reduction since the year-ago quarter.

Selling, general and administrative costs fell by 12.5 percent in the quarter and capital expenditures dropped to $2.4 million in the quarter from $27 million a year earlier.

(Reporting by Lisa Baertlein, additional reporting by alexandria Sage; Editing by Steve Orlofsky and Tim Dobbyn)