Fashion retailer Next has reported a better-than-expected 5.7% rise in annual profit and said it would not need to increase prices by as much as previously thought.
Next trades from about 500 stores and online and is often considered a good barometer of how consumers are faring.
It said inflationary pressures were expected to ease as freight costs drop and the cost of goods improve.
However higher costs for wages and energy are still expected to reduce its profit this year. Its shares fell 5% at the open, after it retained its cautious outlook.
Next has shown more resilience than most to the cost-of living crisis in Britain and is considered by analysts to be one of the best run retailers in the country. Its shares had been up 16% this year, before today's update.
It now expects like-for-like price inflation in spring/summer of 7% and 3% in autumn/winter - down from its previous forecast of 8% and 6% respectively.
That reflected a significant reduction in container freight costs and improving factory gate prices - the price at which it purchases goods - due to increased factory capacity and efforts to move production to more cost effective areas.
The improved price outlook fits with a Bank of England forecast for inflation to fall from its 10.4% annual rate in February to below 4% by the end of 2023.
Next made a pretax profit of £870.4m in the year to January 2023. This compared to guidance of £860m and up from £823.1m in 2021-22.
Sales of items sold at full price rose 6.9% in 2022-23, with total sales up 8.4% to £5.15 billion.
For 2023-24, Next kept it kept its guidance for a 1.5% decline in full-price sales and profit of £795m.
In the first eight weeks of its new financial year full-price sales were down 2%, in line with its expectations.
Meanwhile, the Nike boss said today he did not think the downturn in the UK economy would be long lasting.
Recent gauges of Britain's economy have suggested it could sidestep a long-lasting downturn that had been widely predicted last year.
"We've never thought that the downturn would be long-lasting," Next CEO Simon Wolfson told Reuters.
Next buys troubled retailer Cath Kidston
Next has bought struggling retailer Cath Kidston from its administrators for £8.5m.
The cathkidston.com domain will be licenced back to the administrators for up to 12 weeks to clear stock before a re-launch under Next's ownership.
Next will buy the brand name, domain names and intellectual property of Cath Kidston.
Cath Kidston, founded in 1993 and known for its floral vintage home-furnishing patterns, had filed for administration in 2020 after the pandemic forced it into insolvency.
It was bought by retail investor Hilco Capital in June last year.
Next also bought collapsed online furniture retailer Made.com and clothing chain Joules last year.
The joint administrators of Cath Kidston said in a separate statement that its stores in London, Ashford, Cheshire Oaks and York - which together employ 125 people - will remain open to trade down stock before closing permanently.
