Fashion chain Next today posted "robust" half-year results after cost cutting and a focus on margins helped profits rise 15% in testing conditions.
The improvement to £213 million in the six months to the end of July came despite a 1.5% drop in like-for-like sales at its core high street business.
Next repeated its warning last month that selling prices were likely to rise by between 5% to 8% next spring due to factors such as higher VAT and cost price pressures, including this year's 45% rise in the price of cotton.
It is also expecting little in the way of growth in consumer spending in the foreseeable future but said it still expected profits for this financial year to be between 6% and 11% higher - to £535 million to £560 million.
"Next does not expect a double dip recession nor do we anticipate a meltdown in consumer spending, not least because overall employment levels are holding steady," the company said in its interim results statement.
And while high street sales were towards the lower end of Next's previous guidance, the Next Directory home shopping business has produced a better-than-expected performance after a 7.8% rise in first half sales.
Next, which employs 50,000 people in the UK and has more than 500 stores, said its store payroll, warehousing and distribution costs were managed so that any inflationary cost rises were offset by efficiency gains. This meant that annual staff pay rises were limited to 1% for the second year running.
The company said it was looking to offset product cost pressures through "alternative sourcing, robust negotiation and some product engineering".
As well as higher fabric prices, it is seeing wage cost inflation in some overseas territories, while manufacturing capacity is also an issue in countries where factories were closed at the height of the credit crunch.
The company added that it would focus its store expansion programme on opening more Home stores after the new format outperformed expectations.
It plans to open seven Home shops in the second half of the financial year, taking the portfolio to 30. The outlets are predominately situated on out-of-town retail parks.
Next also anticipates spending around £20 million on refitting older stores in the current financial year, compared with £26 million last year.Reuse content