Mothercare posts slower sales, shares tumble

LONDON, July 23 (Reuters) - British baby goods retailer Mothercare (LSE: MTC.L - news) reported a slowdown in first-quarter sales and said shaky consumer confidence in some Middle Eastern markets had hurt demand at its international arm, sending its shares down almost 8 percent.

Profits from Mothercare's franchised international business, which has some 1,300 stores, have just about kept the group in the black in recent years after its core UK arm suffered heavy losses in part due to cheaper competition.

Mothercare said on Thursday international retail sales fell 1.3 percent in constant currency in the 15 weeks to July 11, down from an 11.4 percent rise in its previous quarter and despite 8 percent growth in new space year on year.

Business in Latin America and the Middle East was weaker than Asia and Europe, it said, with the Middle East impacted by weak consumer demand, fewer promotions and the delay into its second quarter of a sale after Ramadan and Eid.

Initiatives such as store revamps, fewer online sales and product range improvements helped improve UK gross margins and raise UK like-for-like sales by 1.3 percent, although that lagged first-quarter growth of 5.1 percent.

Total UK sales fell 0.9 percent, reflecting store closures as the group downsizes. Mothercare said overall group trading was as expected.

Its shares, up 33 percent in the past year, were down 7.7 percent at 264 pence at 0805 GMT.

(Reporting by Neil Maidment; editing by Jason Neely)