Fashion chain Next today said its shoppers were in better financial shape than first feared as it upped its sales forecasts for the rest of the year.
The high street climate has been "more benign" than anticipated in the three months to October 31, helped by "encouragingly low" inflation and interest rates, it said.
Shoppers are managing their credit carefully and fewer of its Next Directory customers are going into arrears, reflecting a "general improvement in consumer finances", Next added.
In September it pencilled in like-for-like sales high street declines of between 3.5 per cent and 6.5 per cent, but today Next forecast a worst-case 3 per cent slide and said sales could even hold steady against last year in the six months to the end of January.
Next was also helped in October by a smaller-than-expected rise in unemployment and easier sales comparisons against last year, when sales suffered in the wake of the Lehman Brothers collapse.
Like-for-like sales declined by a better-than-expected 1.3 per cent during the period, the firm said.
Marks & Spencer also cheered investors with strong first-half profits today, although conditions are set to get tougher on the high street next year when VAT rises back up to 17.5 per cent, putting upward pressure on prices.
Next added that improved ranges - particularly in womenswear - and its early adoption of new trends had helped its performance, alongside a strong showing from the homeware ranges in the Directory business.
The catalogue and online arm grew sales by 5.1 per cent during the third quarter - prompting Next to raise second-half guidance strongly for Directory from between 0 per cent and 2 per cent to a 4 per cent-6 per cent increase.
Shares in Next rose more than 4 per cent today as Seymour Pierce analyst Freddie George said the retailer's update was "significantly better than expected".
He lifted pre-tax profits forecasts by 13 per cent from £420 million to £475 million for the full year. Next posted profits of £428.8 million last time.