Fashion chain Next has posted a surprise rise in sales over Christmas and upgraded its profit forecast as the retailer’s chief executive insisted the high street still has a future.

Next said full-price sales in the 54 days to December 24 increased 1.5%, ahead of expectations, with part of the improvement down to much colder weather leading up to Christmas.

The group saw online sales jump 13.6% in the period, helping mitigate a 6.1% decline in high street sales.

As a result, Next has increased its full-year profit guidance by £8 million to £725 million, although the figure is still a long way off last year’s £790.2 million.

Next chief executive Lord Simon Wolfson told the Press Association that declining in-store sales are not a death knell for the high street.

Lord Simon Wolfson interview
Next boss Lord Simon Wolfson (PA)

He said: “Retail will remain challenging and the shift from retail to online will continue, but half of our online orders are delivered to a store, so this is not the end of the high street as some people have said.”

However, he added that Next will look to reduce costs by renegotiating rents with landlords and controlling wages and man hours.

The more upbeat trading update will come as a relief to the retailer, which like its peers has been hammered by rising costs linked to the Brexit-battered pound and the resultant collapse in consumer confidence.

But the retailer warned that challenges remain.

“Many of the challenges we faced last year look set to continue into the year ahead.

“Subdued consumer demand driven by a decline in real income, the increase in experiential spending at the expense of clothing, and inflation in our cost prices remain challenges for 2018,” Next said.

However, the firm added that it believes “some of these headwinds will ease” through 2018, with inflation falling to 2% in the first half and disappearing in the second.

The retailer expects total full-price sales this year to nudge up 0.3%, rising to 1% next year.

Lord Wolfson said on Wednesday that whether consumer confidence rises again in correlation with inflation easing will depend on improving trends in the wider economy.

A prominent Leave campaigner, he added that despite many of the sector’s woes – such as soaring costs and falling consumer confidence – being linked to Brexit, he would vote the same way again.

He said: “The only role I played was putting my head above the parapet and saying which way I was voting.

“I’d vote the same way today.”

Next is the first in a long list of retailers due to report on Christmas trading in the coming weeks, with experts predicting that some firms could have to issue profit warnings.

Among the bevy of firms reporting figures are AO World, Morrisons, Sainsbury’s, Ted Baker, Tesco, Marks & Spencer, John Lewis, Debenhams, ASOS and Dixons Carphone.

Recent data has done nothing to inspire confidence for retailers, with figures from Springboard showing footfall in the last trading week before Christmas fell by 7.1% year on year, while on Boxing Day it plummeted 5.9%.

Next shares rose more than 9% to 4,916p in morning trading as investors welcomed the update.

Shares in other retailers were also up, including Marks & Spencer, Debenhams, Ted Baker and Primark owner Associated British Foods.