A STRONG performance by home shopping arm Next Directory helped to compensate for disappointing in-store sales in the three months up to Christmas, fashion retailer Next said today.

Next reported an overall 3.1% increase in sales compared with the same period a year earlier, with retail sales down 2.7% between August 1 and December 24 while Next Directory sales were up 16.9%.

The group said its total stock for its end of season sale was up 10% on last year and reported its sale had gone well.

“Despite a good final week before Christmas, November and December sales were disappointing, given that snow adversely impacted sales in 2010,” NEXT said.

“A number of factors have subdued sales in the final quarter and it is hard to judge to what extent warm winter weather and higher levels of competitor discounting masked the deeper, longer lasting, economic effects.”

The statement added: “We did not discount our products in the run up to Christmas and maintained operating margins. We continue to expect full year profit before tax on continuing business to be in line with our previous guidance.

“We are now narrowing our guidance range to �7million either side of �565m. This figure would represent an increase in profit of plus 4.0% on last year.”

Next said that it expected the inflationary squeeze on consumers to ease, but it still feared the adverse affects on business confidence caused by the continuing difficulties in the eurozone.

But it said it said given the level of uncertainty around next year it will continue with its five point approach to managing the business through a difficult consumer environment.

This included: setting realistic and conservative sales budgets; controlling costs; opening profitable new space where we achieve excellent returns on capital invested; growing its Next Directory online business, both in the UK and overseas; returning surplus cash to shareholders through share buybacks in order to boost earnings per share.

“On this basis our internal budgets for the year ahead show modest growth in overall Next brand sales with profit before tax only slightly up on this year. We anticipate that Next will generate in the order of �200m of surplus cash after capital investment, tax and dividends which we intend to return to shareholders through share buybacks.”

Next intends to announces its full year results on Thursday, March 22.