UPDATE 4-BAA passenger outlook more cautious after Q1 fall

* Numbers at UK airports down 10 pct, more than expected

* Gatwick sale expected within weeks

* Pretax loss widens sharply to 316 mln stg

* Outlook for passenger numbers slightly more cautious

* Strong retail business offsetting passenger declines (Adds line about possible offers for Gatwick, par 12))

LONDON, May 5 (Reuters) - British airports operator BAA said the recession weighed on passenger numbers in the first quarter as building costs at Heathrow helped drive it to a steep loss, though its air-side stores continued to do good business.

The operator of Heathrow and Gatwick airports said numbers fell a greater-than-expected 10 percent and it now had a "slightly more cautious" outlook on passenger traffic than previously.

But it reiterated hopes for a rise in underlying profit this year, underpinned by a strong performance by its retail operations. [ID:nLP415077]

The company, owned by Spain's Grupo Ferrovial SA (FER.MC), said its planned sale of Gatwick -- which was ordered by regulators to meet competition concerns and where passenger numbers fell more than the average -- was due to be announced within weeks.