Lord Wolfson chief of UK luxury chain Next warns of subdued trading

UK fashion chain, Next's chief Lord Wolfson, has warned of another year of ''subdued'' trading for the retail sector, after it delivered a healthy uplift in annual profits.

The Next Directory catalogue, came out with star performance and the online business delivered strong sales growth accounting for nearly half of the group's profits. British multinational clothing, footwear and home products retailer Next plc is  headquartered in Enderby, Leicestershire, England.

Wolfson expects consumers to be loath to spend this year, given that average wage increases continued to lag behind wider inflation.

He said the spending would remain subdued - neither catastrophic nor euphoric - and as long as the real decline in earnings continued, the "discretionary end of the market was going to be a tough place to be", he said.

His cautious outlook comes even as pre-tax profits at Next grew 9 per cent to £621.6 million over the year to 26 January, driven by a stellar performance from its 26-year-old catalogue business.

The bottom line increase is expected to add to the pressure on Marks & Spencer, which suffered a fall in the half year and is said to have suffered challenging trading on clothing and homeware in recent times.

Following a rise in its shares yesterday, Next's market capitalisation stood £6.9 billion higher than Marks & Spencer's £6.3 billion.

Next, which has 541 stores, admitted trading in recent weeks had been "quiet". It added, current demand reinforced its cautious approach.

According to chairman John Barton, the group performed well under difficult conditions, adding however, that the group anticipated another challenging year ahead, with little if any growth in the UK retail economy.

The current financial year has seen sales at the bottom of its target range, although it hopes the situation would improve as "temperatures returned to normal".

The chain is targeting profits of between £615 million and £665 million for this year, helped by stability in supply chain costs.

However, in the event of the pound remaining at its current depressed rate against the US dollar, the company says there would be price rises next year.

Shares stood 1 per cent higher following the update, which came on the day of Next opening its latest store at the new £350 million Trinity Leeds shopping centre.

It added 10 new stores last year, including five Home shops, adding, further opportunities to profitably increase UK selling space existed.