The fashion group Next has reported better than expected sales figures for the months including Christmas and New Year.

But the figures show that customer spending increased at a much slower rate than last year.

Next reported a 1.7% rise in sales in the six months to 4 January compared with 9% the previous year, but added its profits would not be dented by the performance.

The news sent the company's shares up 3% to 770 pence.

Profits on target

Unlike most other retailers, Next does not break out separate Christmas and New Year trading figures.

It is surprisingly okay given their bad start to the season Tony Shiret, CSFB

But the summer sales in July and the current January sale seems to have boosted customer spending at the High Street chain.

The company said that if the two sales periods are left out then trading actually fell slightly, by 0.8%, between 12 August and 24 December.

"We are definitely not proud of the minus 0.8%," said chief executive Simon Wolfson, the youngest chief executive of a FTSE 100 company.

"We had not planned for that at all."

But Next added it would match analysts' expectations for profits of at least �293m ($469m) in the year to February 2003.

The news was welcomed by investors after the group was forced to warn in October that sales between August and October were 3% lower than the year before.

It is at least a step in a direction that we hope could be positive Conrad Rowland, Retail Dynamics

Its latest statement indicated that sales had recovered slightly in the past two months, to give the 0.8% fall between August and December.

"It is surprisingly okay given their bad start to the season," said Tony Shiret, a retail analyst at Credit Suisse First Boston.

Budget boost

Meanwhile, the budget clothing group Peacock said it enjoyed a 3% rise in sales in the five weeks to 4 January.

Peacock, which also runs the Bon Marche chain of clothing shops, said its performance during the festivities was all the more positive because of tough comparisons with the previous year.

"It is encouraging as the comparable period last year was very strong.

"We are on track to deliver significant earnings growth in the current year," the company said.

Glimmer of hope

Signs that Christmas trading was at least in positive territory may calm some fears that fashion groups are suffering from a slowdown in consumer spending.

"It is at least a step in a direction that we hope could be positive," said Conrad Rowland at Retail Dynamics.

The employers' organisation, the CBI, suggested earlier this month that sales in the run-up to Christmas had fallen for the first time in 10 years.

But earlier this week, fellow clothing retailer Alexon reported a 2% rise in sales for the six weeks to 4 January.

However, the group, which includes Alexon women's clothes and Dolcis shoes, also said the sales increase had slowed compared to last time, when the increase was 15%.