End in sight for clothes price rises, predicts Next

Next shook off the "perfect storm" that rocked the retail sector in the first half of the year to post a boost in profits, although its chief executive does not expect a consumer spending recovery until next year.

Lord Wolfson, the retailer's chief executive, hailed Next's resilience "in a difficult year" as profits rose 8.5 per cent to £228m in the six months to the end of June, driven by its online services. He added there would be "little or no" increase in its prices next year.

The rise of Next Directory helped revenues up 3.6 per cent to £1.5bn.

"There is a general trend towards more shopping online. This has been helped by the rise in broadband," Lord Wolfson said.

The Directory business' revenues rose 15.1 per cent to £486.7m. Its success had been helped by improvements in its delivery service, which allows customers to order as late as 9pm for delivery the following day.

"In many ways, 2011 has presented the perfect storm to the retail economy," Lord Wolfson said. "In terms of retail headwinds, everything hit at the same time".

He pointed to the first "concerted" rise in cost prices for nearly two decades, along with the increase in VAT in January. Consumer spending has also been hit by food and fuel inflation, stagnant wages, the Government cuts and tight control of consumer credit.

Next expects the headwinds to ease next year, helped by the collapse of the cotton price bubble and fewer Far East capacity constraints.

Lord Wolfson said: "It seems reasonable to believe that by the second quarter of next year we will begin to see some recovery."