Barnes & Noble’s eReader strategy paid off again in its first fiscal quarter, when sales of the Nook and digital content for the device offset continued declines in the retailer’s book business.

Digital content sales quadrupled and the company’s overall eReader business – including Nook sales, content and accessories – rose to $277 million during the quarter, compared to the same period last year.

The Nook business is expected to double this year to $1.8 billion from $880 million last year.

“Our strategy of growing market share in the exploding digital content business while maximizing cash flow and EBITDA from our retail operations is paying off,” Barnes & Noble CEO William Lynch said in an earnings statement today, calling the Nook eReader and apps “the finest digital reading products on the market.”

Barnes & Noble has successfully leveraged its brick-and-mortar retail stores to gain share in the eReader market over online giant Amazon, which long dominated the market with its Kindle eReader. The introduction of the Nook and other lower cost eReaders forced Amazon to drop prices and come out with cheaper versions of the Kindle.

The success of the Nook helped the company narrow its losses to $56.6 million, from a loss of $62.5 million during last year’s first quarter. Sales rose 2 percent to $1.4 billion as slumping demand for physical books offset strength in the company’s eReader business.

Looking forward, the company expects full year earnings before interest, taxes, depreciation and amortization to be in a range of $210 million to $250 million, a 30 percent to 50 percent increase over last year. Sales are expected to come in at $7.4 billion for its 2012 fiscal year.