Next profit before tax jumped 11.8% to £695.2m for the year ending January 2014 in a “good year” for the fashion retailer.

Next generated revenue up 5.4% to £3.74bn in the period after an “exceptional” final quarter over the Christmas period.

Pre-tax profits across its retail arm increased 5% to £347m, while sales were up 1.7% to £2.23bn. Its directory business, which comprises catalogue and online, recorded an 18.7% surge in pre-tax profit to £359m and sales increased 12.4% to £1.34bn.

Next chief executive Simon Wolfson said sales from new stores and online sales boosted profits with a £12m increase because of new space and online sales growth boosting profits £48m. Existing stores recorded flat profit. Next also made £72m of cost savings in the year.

Full-year operating margin improved 0.5% to 15.6% as Next reduced the stock on markdown 15% and cut freight costs.

Wolfson added that the retailer is focusing on improving the reliability of the Directory services as it fails to deliver 2% of parcels at the promised time. Wolfson also said it will roll out its nex-day free delivery to stores service for orders made before 10pm.

Wolfson said the retailer is continuing to focus on its objectives of developing the Next brand, investing in online growth, investing in profitable new stores and controlling costs. It has also added a new objective to improve customer service.

Next made a pre-tax profit growth guidance for this year of between £730m and £770m.

Wolfson said: “The consumer economy has steadily improved over the course of the last year. This modest improvement looks set to continue. However, conditions are likely to remain far from buoyant and there are real risks to the sustainability of the current recovery.”