Simon Wolfson, the Next chief executive, admitted yesterday that the clothing retailer would be one of the hardest hit by the turmoil on the high streets, in a stark warning that wiped £140 million off the group's value.

Shares tumbled 6 per cent as Mr Wolfson said that he expected like-for-like sales at Next's stores to fall by as much as 7 per cent over the coming months, but the group would not be lowering prices to boost business.

Mr Wolfson said that Next was vulnerable this year given that most of its customers had a mortgage, drove a car and had children - all of which are costing more in the present economic climate. “There is no silver bullet or magic formula,” he said. “The value sector will be the one most shielded from the tough trading conditions, but we are not going to devalue the product. I'm not going to surrender margin just to say my sales are OK.”

Next shares closed down 71p at £11.08, a four-year low. The fall in the shares over the past year means that there is almost no chance of the senior management pocketing a combined £13 million bonus this summer.

Mr Wolfson and his other directors effectively bet £2.6 million through an incentive scheme in 2004 that Next shares would be trading at £20 by the end of July. Mr Wolfson, one of the youngest chief executives in the City, said: “None of us expected the enormous drop in share prices we have seen across the whole sector.”

Yesterday's fall in the share price came despite annual results showing that pre-tax profits had risen 4 per cent to £498 million in the year to January on total sales of £3.3 billion, up 1.4 per cent.

Mr Wolfson insisted that the group was making progress on its commitment to put the “magic back” into the brand through new fashion ranges, such as Signature.

However, analysts said that there was every chance that profits would fall in this financial year, given an anticipated £50 million drop in cashflow and that Next's share buyback programme may be curtailed.

Tony Shiret, a Credit Suisse analyst, said: “Our view remains that this situation is becoming unsustainable and that management must accept some responsibility for the long-term decline in the sales density in the retail business. They are still trying to work out what their best position in the market actually is. That doesn't tick the box for unquestionable success, in my view.”

Next has been saved in the past year by its Next Directory home shopping business, where 60 per cent of sales are now generated over the internet. Profits at the Directory unit rose 14.3 per cent to £164.4 million. Next's retail stores delivered a profits rise of only 1 per cent, with like-for-like sales down 3.2 per cent.

He insisted that the right strategy was to “sow the seeds” that ensure that the brand emerges from the downturn in strong health. “Whatever the economy throws at us, the brand will come out this year in better shape than we entered it,” he said.

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