Next downbeat as profits decline

Next says economic conditions may get worse in the coming months

Fashion retailer Next has reported a 12% fall in profits and said there was "no reason" to expect consumer spending to recover in the near future.

The firm said that high food, fuel and mortgage costs were hitting shoppers' pockets while the weaker pound was likely to push up Next's input costs.

Next said profit before tax fell to £173.5m in the six months to 26 July, down from £198.2m a year earlier.

Full-price sales, stripping out the impact of new stores, were down 6%.

"We can see no reason why there should be any recovery in consumer spending during the next six months," the firm said.

"Food and energy prices continue to be well ahead of last year and our customer base is particularly exposed to higher refinancing costs of mortgages."

Next said that it expected autumn and winter sales to be between 4% and 7% lower, and that it was bracing for another tough financial year in 2009/2010.