UPDATE 2-Campers, cyclists help Halfords return to growth

* Q1 like-for-like sales up 1.3 pct, gross margin up

* Camping, cycling sales strong; satnav sales still weak

* Sees "modest upgrades" in full-year profit forecasts

* Shares fall 1 pct, underperforming flat UK midcap sector

(Adds comments by CEO, analyst; share price, background)

By Mark Potter

LONDON, July 29 (Reuters) - A hot start to the summer and a growing trend among Britons to holiday in their home country helped car parts to bicycles retailer Halfords (HFD.L) return to underlying sales growth in the first quarter of its fiscal year.

The firm, which sells one in three new bikes in Britain, said on Wednesday sales at shops open at least a year rose 1.3 percent in the 13 weeks to July 3 compared with the same time last year.

Adjusting for the timing of Easter, like-for-like sales were up 0.1 percent.

That follows a 3.8 percent drop in unadjusted like-for-like sales in the fourth quarter of last financial year and a 7.8 percent decline in the third.

Chief Executive David Wild told Reuters that Halfords saw a mid-teens percentage rise in like-for-like sales of roof boxes, trailers and tents as many Britons, deterred by recession and the weak pound, decided not to holiday abroad.

Demand for upmarket bikes was also strong as commuters looked to save money and improve their health.

But sales of car satellite navigation systems remained down around 30 percent, hit by price deflation, and Halfords' markets in the Czech Republic and Poland were fragile, Wild said in a telephone interview.

The firm, which runs about 460 stores, also said tough property markets meant incentives and other payments from landlords were likely to fall to around 1 million pounds ($1.6 million) this financial year from 2.7 million the year before.

Overall, Wild thought analysts might make "modest upgrades" to their full-year profit forecasts, but remained cautious about the trading outlook.

"VAT (sales tax) is going up on the first of January. As well as that, unemployment will probably peak at that time, so we've got to be a bit cautious," he said.

NOT A CYCLICAL STOCK

Halfords has fared better than many British retailers in the recession, as demand in some of its product areas, such as car parts and maintenance, is relatively inelastic.

But its shares have lagged the UK general retail sector by about 10 percent this year .FTASX5370 as investors bet that it will lag a recovery in more cyclical retailers.

At 0940 GMT, the shares were down 0.8 percent at 338.25 pence, valuing the business at about 700 million pounds.

Singer analyst Matthew McEachran thought analysts' full-year consensus profit forecast was likely to nudge up from around 94.5 million pounds to his own projection of 96 million.

Halfords said gross profit margins had continued to rise in the first quarter and were likely to increase around 100 basis points over the full year, above some analysts' expectations.

But Wild also said new store openings in the UK and Ireland were likely to be towards the bottom of the firm's goal of 10 to 15, which would crimp sales growth slightly.

The firm remained committed to opening three or four more stores in the Czech Republic and two or three in Poland this year, Wild said. (Editing by Will Waterman) ($1=.6092 Pound)