Fashion group JD Sports will make higher full-year profits than expected after Christmas trading beat expectations.

Group like-for-like sales, excluding French business Chausport, rose 2.5% in the five weeks to January 1, bringing the increase for the 48 weeks to that date to 3.1%.

Retail gross margins were maintained at the same level as the previous year and JD Sports said profits would exceed the £75.4m originally anticipated by the City.

However the retailer also warned of “significant challenges” in its new financial year, which begins at the end of this month, because of the VAT rise “and inflationary pressures arising particularly but not only from increased raw material prices”.

Executive chairman Peter Cowgill said: “The Christmas trading performance from the group’s main retail fascias has again been pleasing and in excess of our expectations.

 “I am particularly grateful to all our staff who by their endeavour and commitment ensured that we were largely unaffected over the full five-week period by the difficult weather conditions experienced in December. 

“This performance is the result of our strong product and brand proposition presented in inviting retail settings. Nevertheless the trading environment facing all retailers, and perhaps clothing retailers in particular, will provide additional challenges in the year to come.”