Mothercare indicated yesterday that new mums were continuing to spend on the needs of their babies despite evidence of penny-pinching elsewhere on the high street.

It said it expects business to remain challenging in the coming months.

However the maternity and baby goods retailer predicted annual profits and gross margin in line with market forecasts.

A consensus of analysts is looking for a surplus of £19.8 million compared with £19.6 million last year.

Chief executive Ben Gordon said: "The resilience of the UK business in a difficult trading environment reflects the actions taken to develop Mothercare's position as a specialist multi-channel retailer."

In a trading statement ahead of full-year figures, the group said like-for-like sales in the UK, stripping out the impact of newly opened space, edged 0.2 per cent higher in the 12 weeks ended April 1. Adjusted for Easter, that figure rose 1.2 per cent compared to the same period last year.

Total group sales were 5.6 per cent higher in the final 12 weeks of the financial year. In the 25 weeks to April 1 sales rose 4.8 per cent, and 3.7 per cent in the 53 week period.

Mothercare has had to work hard in the face of aggressive competition from supermarkets offering cheap children's clothing. Like-for-like sales in Britain were flat across the year, slipping 0.3 per cent.

Still, Rhys Williams at Seymour Pierce said the brand had "performed impressively in a tough UK retail market".

The analyst pulled his topof-the-range adjusted pretax profit estimate for the year back to £20 million in response to the statement.

Mothercare said its domestic business "continues to grow steadily", with strong sales from its Direct arm.

"We expect the overall market to remain challenging in the coming months and whilst our trading performance is encouraging, like most retailers we face rising occupancy, employee and utility costs," it added.

Mothercare has recently stepped up its focus on its fast growing international franchise business. It poached a new finance chief in December - Neil Harrington from Asda/Wal Mart's George Clothing UK - to drive over-seas growth.

The group revealed international sales grew 20.1 per cent last year, and surged 28.5 per cent in the last 12 weeks of the period.

Mothercare reports preliminary results on May 24.

The shares have declined 14 per cent since February 14, when they touched a seven-year high, amid fading hopes of a takeover bid from private equity.