Fashion group Next suffered a 3.2 per cent like-for-like sales fall at its core stores business between July 30 and December 24, but expects full-year profits to beat expectations.

The retailer posted the comparable stores sales decline for its 309 shops unaffected by new openings and there was a 0.3 per cent overall fall at its retail division.

Next Directory turnover climbed 2.2 per cent and group sales rose 0.3 per cent in the period.

Next said it was “extremely cautious” about the trading outlook for the year as consumers feel the effect of an end to fixed-rate mortgagers and cautioned that it did not expect Next Retail to post like-for-like growth during 2008.

However, Next insisted: “We will continue to take on profitable new space in the UK, expand overseas and grow our online business through Next Directory.”

Full-year profits of between£492 million and£502 million are now expected – “slightly ahead of market expectations” said the retailer.

“While trading has been difficult, the financial performance has been good as a result of excellent cost control and careful management of our balance sheet,” Next said.

Kaupthing analyst Matthew McEachran said: “These figures will come as a big relief given the volatility of trade in the run-up to Christmas.”