Next has said it will not raise shop prices this year as easing cost pressures have ushered in a period of "zero inflation".

The retail giant made the pledge today as it issued yet another buoyant trading update and raised its profit forecast for the fifth time in seven months following better-than-expected sales for the Christmas period.

For the nine weeks to December 30 the fashion and homewares chain reported a 5.7% increase in sales compared to the same period a year earlier, thrashing its previous prediction of 2% growth. In the last two weeks before Christmas, sales jumped by 10%.

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Next said that its costs have stabilised for the first time in three years which should allow the group to "maintain zero inflation in selling prices". This is despite an expected rise in its wage bill in the coming year, including a £25 million hit from the National Living Wage increase in April.

Overall wage inflation is expected to come in at approximately £60m, without which Next said it would have been able to lower shop prices. As things stand, it will partly mitigate against higher wages by not passing through to customers all of the fall in factory gate prices.

Profits for the full financial year to January 27 are now expected to come in at £905m, a 4% increase on last year. Full-year sales are expected to hit a record £4.78 billion.

Richard Lim, chief executive of Retail Economics, said the figures were "astonishingly strong".

"There’s a gap emerging between those retailers who have invested heavily in their digital proposition over the last decade with those who have not and Next is leading the pack," he added.

Next said the decision to raise its profit forecast came amid a consumer environment that looks “more benign than it has for a number of years”.