Next will raise its prices again this autumn as the war in Ukraine has added to a “cocktail of uncertainties” headed by consumers' rapidly-eroding disposable incomes.

Compared to the same period prior to the pandemic, the FTSE 100 fashion retailer reported a double-digit increase in sales and profits for the year to the end of January. However, it also cut its financial guidance for the current year after closing its businesses in Ukraine and Russia, which will knock £18 million off profits.

Next chief executive Simon Wolfson, a prominent supporter of Brexit, said inflationary pressures are a “supply side crisis” driven by the fact there are “simply not enough goods, energy and skilled workers to maintain living standards”. He called on the UK Government to do more to ease these constraints.

“It can reverse the self-defeating barriers it has placed on overseas workers supporting our economy and accelerate, simplify and reform the planning process to increase the supply of desperately-needed housing,” he said in his comment on the economy.

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Staff shortages and supply chain problems will fuel an 8 per cent rise in prices this autumn, Next said, with homeware prices expected to increase by 13% and fashion by 6.5% in the second half of the year. This comes on top of an overall 3.7% increase in the first half.

Sales in UK stores have been stronger than expected in the current year, though Next cautioned it was difficult to draw “too many conclusions” because its stores were closed by Covid restrictions for the entire January to March period in 2021. In a reversal of lockdown trends, there has been a “notable reduction” in spending on homewares and very casual clothing.

With online now accounting for nearly two-thirds of total sales, the group predicted that changing consumer habits could lead it to close more than 140 stores within the next 15 years. The retailer currently has 477 main stores after closing 14 over the past year, and it expects to close 15 in the coming year.

The loss of sales from Ukraine and Russia will be partially offset by more robust trading in the UK, leading Next to cut its profit expectations for the current year by just 1.2%, or £10m, to £850m. Sales are expected to fall by 2%.

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However, this follows a robust performance last year as sales rose 11.5% on a two-year basis to £4.9 billion. Profit before tax was 10% higher at £823m.

Next said it made up for much of the retail sales lost in the first quarter of last year through online, particularly in the homeware and children’s clothing categories. In the second half it benefited from pent-up demand for adult clothing fuelled by what it believes to have been the release of consumer savings accumulated during lockdown.

Zoe Gillespie, investment manager at Brewin Dolphin, noted that Next has cut its debt by half compared to pre-pandemic levels and has returned to an ordinary dividend cycle that is “a welcome move for investors”.

“With the closure of business in Ukraine and Russia, ongoing geopolitical risk, and high inflation, the outlook is mixed for Next,” she said.

“However, the company has a strong balance sheet, an increasingly diverse business, and a proven ability to adapt to whatever situation it finds itself in – all of which means Next remains in a strong position.”