Glimmer of good news on high street

The UK's beleaguered retail sector offered a rare glimmer of good news today after Christmas trading updates from high street big-hitters failed to fulfil City fears of a sales meltdown.

Fashion chain Next and department store firm Debenhams both posted better-than-expected sales figures, while homewares group Dunelm added to the upbeat mood with "very robust" trading.

Next was the FTSE 100 Index's leading riser - up more than 10 per cent at one stage - despite a 7 per cent decline in like-for-like sales at its stores since the end of July.

But the group refused to join rivals in slashing prices before Christmas and investors took heart from a "good start" to its sales as Next stuck to its previous guidance on profits and kept a tight rein on costs.

Debenhams meanwhile posted a lower-than-expected sales decline of 3.3 per cent across its stores in the UK and Ireland in a "creditable" Christmas performance - pushing its shares almost 30 per cent higher.

The company also gained from investing in the quality of its goods as well as price promotions as more careful consumers looked for better quality items.

Out-of-town homewares firm Dunelm said its focus on the value-for-money end of the market had helped it ride out lower sales, along with the failure of rivals such as Rosebys.

And privately-owned fashion chain New Look - another firm that refused to be dragged into the high street's pre-Christmas price war - enjoyed a successful Christmas after sales rose 2.8 per cent on a comparable basis with a year earlier.

BGC Partners' David Buik said of Next and Debenhams' updates: "In all fairness, they were probably better than expected and what is encouraging about both companies is the fact that both managements seem to be good housekeepers."

But despite the signs of a post-Christmas sales boost, high street trading could slide again as shoppers head back to the office, Seymour Pierce retail analyst Freddie George added.

"It was not quite as bad as expected because of the week after Christmas, but now everybody is back at work we might see that fade away," he warned.

And while Next's update impressed investors, the group's finance director David Keens said the group was going through the toughest trading conditions since the recession of the early 1990s, and warned a weaker pound was likely to push up prices later this year.

"It has been a very, very tough five-month period. In particular the months between mid-October and mid-December. You have got to go back to the early 1990s to see a period as difficult as this for our retail business," he said.

Following today's updates attention will now focus on high street bell-wether Marks & Spencer, which gives its own Christmas update tomorrow.

M&S has refused to comment on reports in The Times that it will cut more than 1,000 jobs from shop floors, head office and support sectors.

The job cuts would come just three months after the retailer controversially lowered its redundancy terms for employees - and then sacked the whistle-blower who leaked the details to the press.

M&S is also expected to post dismal sales figures for the three months to Christmas after a 6.1 per cent decline in overall UK like-for-like sales between July and the end of September - its worst performance since 2005.

As well as hitting M&S, the bleak retailing climate has sent a string of businesses such as children's clothes retailer Adams, Woolworths, music and entertainment chain Zavvi, and MFI under in the past six weeks.