High street slowdown hits Next and John Lewis

Retailers hail online festive boom but warn of a growing squeeze for their rivals

Next and John Lewis have warned of another tough year for the high street that is likely to lead to more retail casualties, despite booming online sales helping both chains to deliver robust festive trading.

Lord Wolfson, the chief executive of the fashion chain Next, expects consumer spending in 2012 to be "much the same as last year" and said the dip in its latest retail sales was "slightly disappointing".

Meanwhile, John Lewis expects "trade in 2012 will undoubtedly be challenging and economic conditions volatile" but described as "outstanding" a 6.2 per cent rise in underlying sales in the five weeks to 31 December.

Their downbeat prognosis for this year points to more misery for struggling retailers after La Senza, Past Times, D2 and Hawkin's Bazaar entered the intensive care ward over Christmas.

Next week, Marks & Spencer, Debenhams, Tesco and Sainsbury's are among those to update on Christmas trading.

Among listed retailers, Next was first out of the blocks and reported sales down by 2.7 per cent at its 500-plus stores between 1 August and 24 December. But stripping out new stores, its retail sales fell by 5.2 per cent in the eight weeks since the end of October, according to analysts at Espirito Santo.

Lord Wolfson said: "The end of November and the first three weeks of December were a bit disappointing."

This was partly as it had been expecting a bigger bounceback in sales compared with the same trading period in 2010 that was badly affected by heavy snowfall.

But he said Next enjoyed a "good week before Christmas" and, despite carrying 10 per cent more stock into its Boxing Day sale, expects clearance rates to be ahead of last year and budget.

Total sales at Next rose by 3.1 per cent over the period to 24 December. The star performer was its Next Directory catalogue and internet business that powered ahead by 16.9 per cent.

Next has guided to full-year profits in a range of £7m either side of £565m, a 4 per cent rise on last year.

Online also helped John Lewis deliver a 9.3 per cent jump in total revenues to £596m over its past five weeks. John Lewis grew its online sales by 27.9 per cent over the five weeks and its website has already delivered £600m for the year to date. But the retailer's total sales fell by 4.8 per cent between 25 December and New Year's Eve.

Andrea O'Donnell, the commercial director at John Lewis, said: "We still think the economy will be challenging this year, if not more challenging than 2011. The reality is that many retailers will be planning for zero to negative GDP growth and will manage their cost base accordingly."