Next posted a 1.3% increase in total retail sales for the 26 weeks to July 31 as the fashion and homewares retailer said its clothing retail prices will jump by as much as 8% next year.

Next said retail like-for-like sales, which include online, were in line with expectations with a 1.7% rise, while retail like-for-like sales excluding direct dropped 1.5% during the trading period. The retailer reported that directory sales increased 7.8%.

Next said that increasing cost prices and the forthcoming VAT rise means that clothing retail prices are likely to rise in spring next year, by around 5% to 8%.

The retailer described the consumer mood as ‘cautious’ and added that consumer spending will become more restrained in the second half of the year as spending cuts and tax rises take place.

Next said total retail sales will range between -1.5% to +1.5% for the second half of the year. However, the retailer posted a more positive outlook on ecommerce with an improved online shopping service expected to increase sales between 4% to 8%.

Adding that the end of season Sale had performed well, Next said it expects group profit before tax to be in the range of £535m to £560m.