The boss of fashion giant Next has said the worst of the Brexit-fuelled price hikes on the high street are over as the group upped its earnings outlook after “encouraging” trading.

Chief executive Lord Wolfson told the Press Association the impact of the Brexit vote on the pound “doesn’t look like it’s fuelling an inflationary spiral and is passing right through”.

A prominent Brexit supporter, Lord Wolfson said 2018 will see an end to price rises, with the group predicting stable prices from next autumn.

Lord Simon Wolfson
Lord Wolfson is chief executive of fashion giant Next (Next/PA)

The fashion group hiked its sales and profit guidance as it said trading had turned a corner after a difficult start to its half year, although pre-tax profits still fell 9.5% to £309.4 million for the six months to the end of July.

Shares in the group surged by as much as 12% on the upbeat outlook, with improved trading in the second quarter suggesting efforts to overhaul its directory arm and clothing ranges are beginning to pay off.

But the group’s more cheery outlook is at odds with retail rival John Lewis, which warned over falling consumer demand and cost increases linked to the Brexit-hit pound as it also reported half-year results on Thursday.

John Lewis chairman Sir Charlie Mayfield cautioned the group expects “the headwinds that have dampened consumer demand and put pressure on margins to continue into next year”.

Next put up prices by 4% on average for its spring and summer season this year, but is pencilling in a rise of 2% for next spring and summer, with prices remaining flat at the end of 2018.

Lord Wolfson insisted that the benefit of the weak pound will start to be felt in the economy next year as it boosts exports.

“The bad news will be this year and the good news next year,” he said.

Next is forecasting full-year profits of around £717 million, up from £710 million previously, although this would still mark a drop on the year before.

It said sales could fall by up to 2% or rise by 1.5% over the year, having previously warned of a fall of up to 3%.

Next has been helped by the warmer weather in the summer, together with an overhaul of its product ranges and online offering, which helped total full-price sales rise by a better-than-expected 0.7% in its second quarter to July 29.

But total sales across its high street stores, including markdowns, fell by 8.3% over the first half overall, while directory sales rose 5.7%, leaving total sales 2.3% lower.

Lord Wolfson said it was “not impossible” that high street sales could rise again in its third quarter, especially as it comes up against very weak comparatives from a year earlier.

He said: “The first half of the year has been difficult and sales and profits are in line with our cautious expectations.

“However, our performance in the last three months has been encouraging on a number of fronts and whilst the retail environment remains tough, our prospects going forward appear somewhat less challenging than they did six months ago.”