I would have a meeting with her teacher and guidance counselor. If the school has a reading specialist, ask him/her to attend as well. Ask for suggestions first, and if none of them suit you, perhaps you should bring up the possibility of second grade reading. There are, however, a few things to find out about your school system first. First of all, how do they handle reading in the classroom? Many first grade classes do independent reading groups based on ability, and it would not be much extra effort for the teacher to let her form her own group so she can proceed at her own pace. The other thing to consider is what may happen in the future. DS did second grade math while in first grade, and I assumed they would put him in third grade math when he got to second grade. Unfortunately, there was a scheduling issue that made this impossible, so he ended up doing second grade math all over again. He was miserable, convinced that his teacher thought he was "too stupid" to do anything harder, and I ended up supplementing at home. So whatever solution you settle on, make sure it is something that can be continued in future grades.
Sorry I can't offer more advice, I am still in the process of fighting this battle as well. Hope I helped!