Price deflation on the high street is at an end, says Next

Next, the fashion retailer, says it has detected clear signs that high street deflation is coming to an end, raising the prospect of stronger sales figures in the months ahead.

Next, the fashion retailer, says it has detected clear signs that high street deflation is coming to an end, raising the prospect of stronger sales figures in the months ahead.

The group, which operates 338 stores across the UK, said that customers were starting to adjust the mix of their purchases, buying more expensive items than they had in the past two years.

David Jones, Next chief executive, said that the trend appeared to be driven by a growing preference among consumers for more flamboyant and colourful clothing.

"We have strong evidence that the period of price deflation is coming to an end," Mr Jones said. "Our sales figures strongly suggest that in each sales category ... deflation is over."

Over the past two years, customers have preferred cheaper items. Retail analysts say that the trend has been driven by increasing high street competition in clothing; extra avenues for consumer spending, such as mobile phones; and increasing price consciousness, underpinned by the spread of online trading.

The pressure has contributed to poor performances at many high street chains, most notably Marks & Spencer, although Next's sales and profits have continued to expand and it is regarded by the City as a well-focused business.

"If you look round the high street, people are interested in higher price points," Simon Wolfson, managing director of the Next brand, said. "What we are seeing is a shift in customer tastes. This is not our attempt to put prices up."

The comments came as the group unveiled a strong set of first-half results. Group pre-tax profits in the six months to July were 24 per cent ahead at £80.7m on turnover up 8.3 per cent at £685.1m. Like-for-like sales at the 273 stores trading for a full year were up by 7 per cent.

Retail profits in the half were up by 17 per cent at £46.1m, while profits from its home-shopping business, Next Directory, jumped 42 per cent to £17.6m.

Next said it would add about 175,000 square feet of new space over the full year, a 12 per cent increase. The group said it had picked up eight former C&A stores, which would be converted into Next outlets this year and next. Shares in Next yesterday rose 42p to 650p.