Shares in Debenhams and Next soared this morning as both retailers gave upbeat forecasts on profits despite reporting a decline in sales in the crucial Christmas shopping season.

Debenhams saw its shares rise 24.5 per cent to 35.5p after the group reported an increase in profits, mainly by cutting costs, and said it was “taking market share from competitors in all major categories”.

While Next said profits for the year to January remained in line with market hopes of between £415 million and £435 million, sending its stock up 5.59 per cent to £11.52.

It added that while retailers were facing a “worsening consumer environment”, it cautioned against “some of the more extreme economic forecasts” and said there was “some relief in sight for the consumer” with food, fuel and energy prices set to fall, as well as interest rate cuts gradually feeding through to lower mortgage payments.

Nick Bubb, an analyst at Pali Iternational, said: “They have managed to hold on to their margins despite the downturn. It is a tough market but they are outperforming.”

Both retailers delivered positive profit forecasts despite reporting falling sales. During the six months to December 24, Next said like-for-like sales fell 7 per cent while Debenhams, which operates 153 UK stores, said that for the 12 weeks since 21 October 2008, like-for-like trade had declined by 3.3 per cent.

Next, which operates 480 UK and 140 overseas stores, said: “We expect falling house prices, unemployment and the fear of unemployment to continue to restrain spending.”

While Rob Templeman, chief executive at Debenhams, said: “Looking forward, the trading environment is likely to remain challenging for the whole retail sector.”

Next and Debenhams cautiously optimistic outlooks emerged as another high street stalwart, Woolworths, prepared to end 99-years of trading by closing its last 200 stores.

The 807-store chain, which collapsed last year, was unable to find a buyer and its closure leaves around 27,000 staff out of work.

Yesterday, it emerged that Adams, the clothing group, cut 850 jobs when it shut 111 stores and this morning The Times revealed that Marks & Spencer is planning to shed nearly 1,000 staff following tough Christmas trading.

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