Next expects to raise prices more slowly in the coming year in a sign of easing inflation, but 2023 will remain "very challenging" as consumers continue to struggle with the cost-of-living crisis.

The UK retail bellwether has posted record profits for the year to the end of January, helped by stronger-than-expected Christmas sales that led it to up its guidance to £860 million in pre-tax profits. Today's figures show that it outstripped that enhanced forecast with record annual profits of £870m.

Next said some of its inflationay pressures are abating, notably in the areas of shipping costs and what it pays for goods from factories. 

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As a result, shop price increases are forecast to be lower than previously expected. Costs will rise by 7% in the spring/summer season - down from 8% previously forecast - and by 3% in the autumn and winter months, half of what it had predicted.

In the coming year, Next is currently anticipating a 1.5% decline in sales with profits falling back to in the region of £795m. Next chairman Michael Roney noted that "no one really knows" how the cost-of-living squeeze will affect consumers in the coming months.

"We are preparing and budgeting for a difficult year," he said.