The company said its UK stores sold 2.1% less in the 28 weeks to 12 October 2002 than in the same period last year, although an improvement on the 3.1% slide seen three months earlier.

Overseas, sales were better, growing 28.9% and leaving the business overall nursing a slim 0.7% growth in sales.

But that will leave margins narrower than last year, said the company's finance director and acting chief executive Mark McMenemy.

"The first half has been disappointing both in sales and profit," he said, admitting to under-performance in the key children's clothes department.

Turnaround

Mothercare has had a rough ride in recent years.

A new warehouse system comprehensively failed to work, leaving stores with the wrong stock at the wrong time and badly denting the company's brand.

In the last financial year, pre-tax profits slumped from £10.2m to £4.2m.

Now, Mr McMenemy said, the turnaround is under way and the second half of the year should be better.

A new chief executive, Ben Gordon - Walt Disney's former head of Disney Stores in Europe and the Asia Pacific region - will join the company on 2 December.

But he warned that despite improvements to the stock tracking systems, costs "are not yet coming down as anticipated".

"Mothercare continues to work to reduce these costs as a matter of urgency," he said.