Retail clothes company Next has seen better-than-expected profits, but year-on-year sales in the company's 224 existing stores fell by 2.9%.
Next opened its biggest store to date last year
While Next saw its annual pre-tax profits rise 6% to £449.1m ($782.6m), sales in the first seven weeks of this year registered a drop of 8.9%.
Shares in the company, which makes clothes and household goods, closed almost 4% lower at 1662 pence.
The retailer believes the economic environment will remain challenging.
Wolfson said he expected a like-for-like sales drop of 3% to 5% for the remaining first half of this year.
"It certainly wasn't where we were planning to be," said chief executive Simon Wolfson, quoted by Reuters news agency.
Despite this fall in sales, the company said more store space, cost-cutting and better stock management had enabled it to boost its profits.
Last year, the company increased its net selling space by 980,000 sq ft and also opened its largest store, in the centre of Manchester.
Tony Shiret, an analyst with Credit Suisse said, "It is a bit of a shocker, but there's no profit warning. Last year they demonstrated they are capable of defending the bottom line."
The profit statement comes as the firm plans to test a new layout for its shops. By August, this new format will be seen in six new stores. Two existing stores are also being converted to the new format.
The fashion retailer reported 3.2% losses in like-for-like sales in the five months up to the end of December.
In January, the customer base stood at 2.1 million, an increase of 11%.
The firm said it was aiming to build on its home catalogue base and had sent out a trial electrical goods brochure, NEXTeletric, to 300,000 customers. If successful, it will expand this service in the autumn.