Next, the fashion and homewares retailer, blamed the growing financial burden faced by millions of home-owners as it yesterday effectively wrote off the prospects for growth this year on the high street.

Simon Wolfson, the chief executive, said Next expected its third successive year of negative like-for-like sales in its stores as customers faced up to higher mortgage bills.

“Customers feel under financial pressure and while I don’t think that-pressure is going to get a lot worse, it’s not going to get any better either,” Mr Wolfson said. “We are going to have to run hard just to stand still.”

The grim forecast overshadowed a trading update that showed Next had emerged from Christmas with its margins intact. Like-for-like sales across Next’s high street stores fell 3.2 per cent in the five months to December 24, but the retailer was one of only a handful that refused to slash prices until Boxing Day.

Pretax profits in the financial year to January 31 are expected to come in at between £492 million amd £502 million, slightly above previous forecasts. However, Next shares fell nearly 7 per cent, or 114p to £15.52, in line with the general sell-off across the sector.

Mr Wolfson promised a year ago to put “the magic back” into Next and has focused on moving its fashion ranges upmarket, which has helped to nudge prices higher. Like-for-like sales across the high-street estate fell 7 per cent in the run-up to Christmas 2006.

Mr Wolfson said he believed that the clothing retailers that would do well in the coming year would be those concentrating on quality and design, the “must-have” buys.

He also said the internet would continue to drive business at Next Directory, where sales rose 2.2 per cent in the past five months. The group plans to control costs this spring by cutting stocks by about £50 million, or 3.5 per cent.

“When the consumer comes back, retail will come back with it,” Mr Wolfson said. “I don’t think shopping is dead. It’s an easy thing to believe when there’s a downturn but it’s not the case.”

John Stevenson, an analyst at Shore Capital, said: “Next’s trading performance may look better than many before the end of this month’s reporting season.”

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