Fears of a bloodbath on the high street emerged yesterday as Next, the clothing retailer, gave warning that higher interest rates are yet to hit consumer spending.

Simon Wolfson, the chief executive of Next, said that despite a tough summer for retailers, he was “acutely aware” that millions of homeowners had still to feel the full impact of the higher cost of borrowing.

Mr Wolfson gave warning that the crunch on sales could come over the key Christmas sales period. He said: “We think that higher rates will feed through in three to four months’ time. The economic environment is going to be tougher.”

Mr Wolfson added that his group’s burgeoning Next Directory business could “flatline” over the next year, given growing economic pressure on customers and fierce competition from the internet.

The stark signal came as JJB Sports gave warning that it was likely to miss full-year profit targets by as much as 25 per cent this year, sending its shares down 14 per cent.

French Connection said that despite progress in its womenswear ranges, wholesale orders in autumn were likely to be below last year’s level given “challenging” trading conditions.

Morgan Stanley added to the gloom by issuing a savage note on DSG International, saying the electrical goods retailer is “much more sickly than people realise”, given its business model and a likely consumer downturn.

Five interest rate rises by the Bank of England in the past year have added nearly £80 to typical monthly repayments on a £100,000 mortgage and the rise is soon expected to hit borrowers coming off fixed-rate deals.

Concerns about a consumer downturn pushed the British Retail Consortium (BRC) to call on the Bank to cut rates last week when it revealed that high street sales rose by only 1.8 per cent in August on a like-for-like basis.

Kevin Hawkins, director general of the BRC, said: “Interest rates are hitting disposable income and fierce competition is causing deflation. The pressure is on and it’s going to get quite aggressive in the run-up to Christmas. There will be victims, there always are.”

Next said like-for-like sales across its high street stores had fallen 4.8 per cent in the past six weeks and that it expected a decline of between 1 and 3.5 per cent over the next five months.

Next’s forecasts came after half-year results showing that cost cuts, and a fall in bad debt for Next Directory, helped to lift group pre-tax profits by 10.8 per cent to £198 million in the six months to July.

The performance was far ahead of City expectations, and Next shares rose 79p, or 4 per cent, to £19.40, despite Mr Wolfson urging investors “not to get carried away”. However he said Next was making good progress in recovering from last year’s slump, when like-for-like sales fell 7 per cent, by revitalising ranges and bringing new products into stores more often.

Next is to showcase the progress with a £6 million television advertising campaign, starting this week.

Nick Bubb, analyst for Pali International, said he was confident Next could withstand the consumer downturn, but added: “It’s hard to be so optimistic about some of Next’s rivals. We would be wary about Debenhams and about Marks & Spencer.”

JJB Sports said that it fears that pre-tax profits could be £35 million this year, against forecasts of £47 million.

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