Borders Group Inc reported a quarterly loss as the second-largest U.S. book store chain cut prices and continued to grapple with lower sales amid a shift to electronic books.

Like its larger bricks-and-mortar rival Barnes & Noble Inc , Borders has had to contend with fierce competition from the likes of Amazon.com Inc whose Kindle, introduced in 2007, has helped it garner a commanding position in the growing digital books market.

But Borders has been much slower than Barnes & Noble, which introduced its Nook e-reader last year, to attack the e-books market and only launched its own e-bookstore in early July.

Borders' sales fell 11.5 percent to $526.1 million. Sales at its superstores open at least a year, or same-store sales, fell 6.8 percent, which follows a 17 percent decline in the year-ago quarter.

Underscoring how much ground Borders has to make up, the retailer said sales on its website had risen 56.2 percent to $15.5 million, but that only represents 3 percent of sales. At Barnes & Noble, they make up about one-tenth of sales.

As part of its strategy to catch up, Borders has cut the prices on some of the e-readers it sells.

In contrast to Barnes & Noble, Borders opted not to design its own e-reader, preferring to offer as many devices as possible to lure shoppers. It currently sells six e-readers, including a co-branded device with Kobo, and said it would add others in the coming weeks.

Borders reported a net loss of $46.7 million, or 67 cents a share, for the second quarter ended July 31, compared with a loss of $45.6 million, or 76 cents a share, a year earlier.

Excluding discontinued operations, the loss was 74 cents per share, compared with a loss of 75 cents a year ago.

On top of declining sales, Borders' gross margin took a hit as the bookseller cut prices, falling 3.7 percentage points to 19.3 percent. Borders got some relief from cost-cutting and the closure of some stores.

In a statement, Borders Chief Executive Mike Edwards said the retailer would also focus on making its superstores more enticing by offering more non-book items and cater more to children.

Barnes & Noble, which last week also reported a quarterly loss, also said it would dedicate more in-store space to toys and games.

Borders shares were unchanged in morning trading, but are down 69 percent since hitting a yearly high last September.

Borders operates 506 namesake superstores in the United States.

(Reporting by Phil Wahba; editing by John Wallace, Dave Zimmerman)

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