UPDATE 2-WH Smith's Q3 sales down 4 pct, outlook positive

* Q3 high street like-for-like sales down 5 pct

* Q3 travel like-for-like sales down 2 pct

* Group confident for full year, despite tough conditions

(Adds further details)

By Rhys Jones

LONDON, June 4 (Reuters) - WH Smith (SMWH.L), the British newspaper, books and stationery retailer, reported a better than expected 4 percent fall in underlying third-quarter sales on Thursday but said it was confident on its full-year prospects.

The group, which trades from 557 high street stores across the UK, said sales at stores in its town centre businesses open more than a year fell 5 percent over the 13 weeks to May 30.

In the travel business -- outlets at airports, train stations, hospitals and motorway service areas -- like-for-like sales were down 2 percent.

"The economic environment remains uncertain and, whilst we continue to be cautious about consumer spending, we are confident in the outcome for the full-year," the company said in a trading statement.

Analysts on average expect WH Smith to report a pretax profit of 80 million pounds ($130.2 million) for the year to the end of August 2009, up from 74 million pounds made the previous year, according to Reuters Estimates.

"Smiths' numbers are pretty robust with high street sales marginally better than we expected but airport demand proving to be tough," said KBC retail analyst John Stevenson.

"Smiths is one of the few retailers we expect to deliver profit growth this year because there are still cost savings to come through and demand in travel should pick up."

The newsagent, formed in 1792, said although airport passenger numbers had remained soft, it had outperformed the airport retail market.

The retailer also said its balance sheet remains strong and that it continues to generate high levels of cash.

Smiths met analysts' forecasts in April with a half-year profit of 61 million pounds, down from 64 million in the same period a year earlier.

Shares in WH Smith, which have risen in price by a third over the last three months, closed at 433.5 pence on Wednesday, valuing the group at around 700 million pounds. ($1=.6144 pounds) (Editing by Greg Mahlich)