NEXT has issued a profits warning after the retailer blamed warm weather in the final few weeks of last year for a disappointing trading performance in the run-up to Christmas.

Retail sales fell 0.5 per cent in the 60 days before Christmas, although Next's Directory business, which includes online and catalogue, posted a 2 per cent increase in revenue.

That left total sales in the period up just 0.4 per cent year-on-year, of which 1.5 per cent came from new space.

The company, which has more than 500 stores, says it now expects annual pre-tax profits to be about £817m. This is at the lower end of its previous guidance issued in October, when it predicted profits of between £810m and £845m.

The retailer, which did not take part in some of the heavy discounting sales events at the end of last year, said in a statement: "We believe that the disappointing performance in the fourth quarter was mainly down to the unusually warm weather in November and December."

The statement also pointed to "mistakes and challenges" faced by the business. "Specifically, we believe that Next Directory's disappointing sales were compounded by poor stock availability from October onwards."

In addition, Next said that online retailing was becoming tougher as competition intensified.

Nevertheless, the company said full-price sales for the year-to-date were 3.7 per cent ahead of last year, just below the bottom end of Next's previous guidance of a 4 per cent to 6 per cent rise.

Next’s trading statement is the first sign of the overall health of the high street during the Festive period. John Lewis will reveal its trading figures today (Wednesday), while Marks & Spencer is due to update the market on Thursday.