Next raises profit forecasts

Fashion retailer Next offered further cheer from the high street today as it raised profit forecasts after better-than-expected trading.

The group said the consumer environment was "more stable than expected" after unemployment rose less than predicted and shoppers benefited from low inflation and interest rates.

Next grew like-for-like sales 3.2 per cent in the 22 weeks to 24 December and now expects full-year profits of between £490 million and £500 million - ahead of its November guidance.

The retailer's positive figures came after John Lewis said it had notched up more than half a billion pounds in sales across its department stores in a record-breaking festive season.

Next added that its post-Christmas sale had "gone well", but also sounded a cautionary note over 2010 and said the outlook was "hard to gauge".

The firm warned it "does not necessarily expect the year ahead to be as good as the previous six months" as the scale of the action needed to tackle the UK's dire public finances threatens a consumer recovery.

Next added that possible tax hikes, Government spending cuts and rising interest rates could hit shoppers in 2010.

Next's sales were helped in the final two weeks before Christmas by the colder weather, although the group improved its ranges and gave more space to home furnishings which performed "particularly well".

Excluding online sales, like-for-like sales across more than 500 Next stores were up 1.6 per cent during the 22-week period.

The firm is planning for lower sales growth at its outlets of between 1 per cent and minus 3 per cent during 2010, although its Directory online and telephone business is expected to show sales growth of up to 2 per cent.

Hitting these targets would allow Next to hold profits at a similar level to this year despite factors such as rising VAT - although the firm added that it was able to push stock into the business quickly if trading was better than expected.

"We believe Next is well placed to face the challenges of the year ahead," the firm added.