LONDON (Reuters) - Laura Ashley Holdings Plc (ALY.L), the British fashion and homewares retailer, said on Wednesday 8 September it was cautiously optimistic after sales increased in the first half despite falling profits.

For the 26 weeks to Aug 1, Laura Ashley said pretax profit fell to 1.1 million pounds compared with 4.7 million last year, due to foreign exchange losses of 5.5 million during the period.

The company, which said underlying gross margins remained broadly flat, reported that total group sales rose 6.3 percent to 127.8 million pounds.

"In what has been a challenging consumer environment, I am pleased that Laura Ashley has once again demonstrated its resilience," said Chairman K P Khoo, adding that the company out-performed in the UK market.

UK retail sales rose by 6.1 percent to 101.5 million pounds.

The company also reported growth in its online and international operations. It has 228 stores in 26 countries.

"I am encouraged by the positive start we have seen to the second half and remain cautiously optimistic that this momentum will continue through to the end of the year," Khoo said.

The retailer, which sells home accessories, furniture, decorating products and fashion, has approved an interim dividend of 0.25 pence per share.

Shares in Laura Ashley opened 3.1 pct higher at 16.75.

(Reporting by Sharon Lindores; Editing by Jon Loades-Carter)