Next hits an all-time high after Christmas trading lift

The fashion chain Next yesterday raised hopes for a modest improvement in high street trading conditions this year after it posted a robust performance over Christmas and raised its profit guidance.

The stand-out performer was its Next Directory online business, which posted double-digit sales growth, and the update sent shares in the retailer soaring to an all- time high.

Next's internet and catalogue sales were better than the City had expected and followed John Lewis, the department store chain, delivering barnstorming underlying sales up by 13 per cent over the festive period.

Marks & Spencer, Debenhams, JD Sports Fashion, supermarkets Tesco and Sainsbury's among others will provide a clearer picture of Christmas trading next week. While most are expected to have held their own, supermarket Morrisons appears to have had a Christmas to forget, with joint house broker Jefferies forecasting a 2.8 per cent fall in underlying sales at the grocer.

Lord Wolfson, the chief executive of Next, said: "I don't think there will be any dramatic change in the consumer environment in the year ahead."

But crucially, he expects the pressure on household budgets to ease in 2013, as the gap between wage growth – which has been running at an anaemic 1.7 per cent – and wider inflation narrows further. Lord Wolfson forecasts a "slow recovery in real wages" this year that will give shoppers slightly more spending power.

Next ticked up its profit forecast for the year that ends this month to between £611m and £625m, which would be 7.1 per cent to 9.6 per cent ahead of the previous year. Its earlier guidance had been between £590m and £620m for 2012-13.

Next's shares added 101p, or 3 per cent, to 3873p yesterday.

The key drivers behind its increased forecasts were "slightly better than expected" cost control and an improvement in markdowns and margins, driven by it carrying 8.2 per cent less stock into its clearance sale that started on Boxing Day. Lord Wolfson said: "Our clearance rates were ahead of last year."

Shoppers started queuing outside its Milton Keynes store at 1am on 26 December ahead of a 6am opening.