Mothercare has offset poor sales from its UK business by recording a strong year in online and international trading.

The company, which is in talks to buy Early Learning Centre, reported a 5.1 per cent increase in total sales for the year to March 31, 2007, with turnover during the fourth quarter up by 4.4 per cent. Shares rose to 386p from 382.5p.

However, Mothercare's UK business, including online sales from its "Direct from Home" service, saw full-year like-for-like revenues rise by just 1.6 per cent, while its 234 British stores generated an increase in turnover of only 0.8 per cent.

In contrast, Mothercare's international business reported a 30 per cent rise in sales. The company operates 328 franchise-only stores in 38 countries and is planning to increase its presence to include Egypt and Kazakhstan.

Ben Gordon, the chief executive at Mothercare, said that the company would also continue to expand its coverage in countries where it already has stores. He added that he was pleased with the UK business, which was operating in a difficult trading environment.

Mothercare is hoping to bolster its UK business with the addition of Early Learning Centre and the children's store, Daisy & Tom, both owned by Chelsea Stores, in which Tim Waterstone, the founder of the eponymous bookstore, holds a 15 per cent stake.

As for the deal thought to be worth £85 million, Mr Gordon said that Mothercare was undertaking due diligence on Chelsea Stores, but declined to comment further.

During the year, Mothercare expanded its out-of-town stores, which total 10 sites that span an average of 15,000 square feet. Within the format, Mothercare has doubled the range of pushchairs it sells from 35 to 70. The additional 35 varieties of pushchairs can be purchased only over the internet, through Mothercare's Direct to Home service.

Mothercare has also completed to move to a new bespoke distribution centre in Coventry, which has increased the number of products available in stores from 65 per cent to more then 90 per cent over three years, during which management has turned around the once struggling business.

Mr Gordon said that the new centre had also reduced distribution costs from 8.5 per cent of sales to 6.5 per cent, although he added that the company is hoping to cut the expense further to 5 per cent of revenue.

Mr Gordon said that Mothercare's clothes, that sell under the "Moda" brand, had increased the quality of its garments while cutting costs by sourcing directly from areas such as India. The clothing division is run by Gillian Berkman.

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