Next chief upbeat despite another poor showing

Next, the fashion retailer, also saw relatively weak sales over Christmas and admitted to buying mistakes. Full priced sales between 12 August and 24 December were down 0.8 per cent on last year, though this was better than the minus 3.1 per cent reported in October.

The buying errors meant Next was left with higher unsold stocks going into its winter sale. Simon Wolfson, the chief executive, said: "We've made some mistakes in some of our ranges. But we think we've put a lot of that right for this season."

Analysts said the cut on some of the womenswear ranges was too slim. "Not all Next customers are like Kate Moss," one said.

However, Mr Wolfson was more upbeat than Dixons in his assessment on the economic outlook and the company also said its full-year profits would be above market expectations. "My feeling is that people are being overly pessimistic," he said. "There is a danger that commentators based in London are perhaps not representative of the rest of the country."

Next shares rose 3 per cent to 770p on the news, which was better than expected. Merrill Lynch put the stock on its "buy" list with a 950p price target.

Next's total retail sales between 28 July and 4 January were up by 12.4 per cent on last year, helped by new store openings. "People are waking up to the fact that there is more to profits than like-for-likes," Mr Wolfson said. "Our new space and refits exceeded our targets."

Next said full-year profits would be between £293m and £303m, against consensus forecasts in the City of £293m.

The Peacock Group, the discount retailer, also delivered encouraging figures with like-for-like sales in the five weeks to 4 January up by 3 per cent on last year. The Peacocks stores saw flat sales but the group total was helped by the newly acquired Bon Marche chain, where sales rose 7 per cent.

Underlying gross profit was up 4 per cent. Richard Kirk, chief executive, said: "The repositioning of Peacocks and the introduction of more fashionable ranges is beginning to deliver sales and margins improvements."

But shares in Laura Ashley plunged 1.25p to a fresh five-year low of 8.25p as the company issued another profits warning. It said it would only break even this year due to problems in its stores in Continental Europe as well as lower than expected sales and margins in clothing and home furnishings. Williams de Broe had previously forecast profits of £5.5m.

Group like-for-like sales over Christmas were up 6 per cent on last year, though underlying clothing sales fell. The company said the economic downturn in Continental Europe had hit the group. Discounting in stores earmarked for closure had also been a factor.