Next issues reassurance on prices

The group, which has more than 500 stores in the UK and Ireland, said a sharp reduction in cotton prices and an easing of manufacturing constraints in the Far East would take some of the pressure off its own prices.

Next has already warned of price increases this autumn but said the improved trend meant selling prices were unlikely to rise further next spring.

The reassurance came as the retailer reported a 3.2 per cent increase in total sales in the 26 weeks to July 30, excluding VAT, and confirmed that profit expectations for the full year were in line with previous guidance.

Next previously warned that its ranges could be up to 10 per cent more expensive this autumn and winter as rising commodity prices continued to squeeze the business.

But the retailer said cost-price inflation in the first of half of 2011 was expected to remain at broadly the same rate of 8% in the next six months.

Looking further ahead, the company said 2012 would be a “benign year” for cost inflation.

The company said a 1.7 per cent drop in store sales was more than offset by a 15.1% surge in sales at its online and catalogue division, although this was boosted by an increased allocation of sale stock.

Next expects to earn between £527m and £577m in the full year, compared with £551m the previous year. This excludes the impact of the sale of its contact centre business Ventura.