By Phil Wahba

NEW YORK (Reuters) - Bookstore chain Barnes & Noble Inc <BKS.N> will eventually feel a modest boost from the liquidation of its largest rival, Borders Group Inc, but still faces stiff competition and an industrywide decline in book sales, Wall Street analysts said.

Borders <BGPIQ.PK> said on Monday it would close out its 399 remaining stores by September after failing to find a buyer willing to keep it in business. [ID:nN1E76H1LQ]

Barnes & Noble, which operates 717 superstores, will struggle during its rival's going-out-of-business sales, and then benefit as it wins former Borders shoppers, according to analysts.

But Barnes & Noble's real growth will come from its popular Nook e-reader and increasing sales of e-books.

"Barnes & Noble is not grabbing a larger slice of a growing pie," Morningstar analyst Pete Wahlstrom told Reuters on Tuesday. "It would be more compelling news if the bookselling industry had found a point of stabilization."

According to a Goldman Sachs study last year, Amazon.com's <AMZN.O> sales of physical books last year, as opposed to e-books, surpassed those of Barnes & Noble. Amazon is the top seller of digital books.

Barnes & Noble shares were up 3 percent at $17.75 on Tuesday morning.

Barnes & Noble, which put itself up for sale last year, is currently assessing a $1 billion, or $17 per share, bid by John Malone's Liberty Media Corp. <LINTA.O>

Wahlstrom said the effect of Borders' bankruptcy on Barnes & Noble's attractiveness as a buyout target was "nominal."

Same-store sales at Borders had been suffering double-digit percentage declines for years. Overall sales fell from $3.4 billion in the year ended February 2007 to $2.3 billion last year. Barnes & Noble has fared better, with more modest declines in comparable sales.

Still, Barclays analyst Alan Rifkin said in a note to clients on Tuesday that Barnes & Noble could grab between 10 and 15 percent of Borders' 2010 sales, which would lift Barnes & Noble's revenue as much as 4.5 percent.

Yet the benefit could be short-lived, Rifkin warned, "given the significant shift from brick & mortar to E-readers."

Last week, Janney Capital Markets analyst David Strasser said the next round of store closings by Borders, to occur in more desirable locations, will hurt Barnes & Noble more than the previous Borders shutdowns, since more shoppers will be lured away from B&N for the closing sales.

A possible benefit to Barnes & Noble could occur if it moves into attractive locations vacated by Borders, though Morningstar's Wahlstrom said this would happen only in a handful of locations.

(Reporting by Phil Wahba, editing by Matthew Lewis)