Clothing retailer Next says it is "extremely cautious" about its prospects for 2008 after a slowdown in sales.
Its instore sales for the period July 30th to December 24th 2007 were down by 3.2 per cent when new openings were not taken into account.
The chain said its combined sales for its Next Retail and Next Directory branches were up by 0.3 per cent compared to the same period in 2006, but much of that was down to a 2.2 per cent increase in its home delivery service.
Next Retail sales were down by 0.3 per cent when compared to the equivalent timescale in the previous year, the firm said.
"Our like-for-like sales performance was in line with the guidance we gave in September and is an improvement on our performance in spring-summer," Next said in a statement.
"This was despite a worsening consumer environment and significant markdown activity on the high street. Next maintained its policy of trading full price in the run-up to Christmas and stocks were well-controlled going into the end-of-season sale."
The retailer says its January sales have so far been "in line with our forecasts" and predicts that full-year profits for the group will be "slightly ahead of market expectations".
However, with retailers in general preparing for a difficult 12 months as consumers continue to feel the pinch of the current financial climate, Next admits it is expecting testing times ahead.
"Our outlook for the year ahead remains extremely cautious, with consumers continuing to face increasing demands on their finances," it said.
"Many will experience year-on-year increases in mortgage charges for much of the coming year as a result of favourable fixed-rate mortgage terms expiring."
The firm says it will continue to take on "profitable new space in the UK, expand overseas and grow our online business through Next Directory" but does not expect a "return to like-for-like growth in the UK in 2008 for Next Retail".