Retail chain Next has delivered a “modest” upgrade to its full-year outlook after an “encouraging” performance amid tough high street conditions.

The fashion group posted a 9.5% fall in pre-tax profits to £309.4 million for the six months to the end of July after total sales across its high street stores, including markdowns, fell by 8.3%.

But chief executive Lord Wolfson said while it was a challenging first half, improved trading in the second quarter suggested efforts to overhaul its ranges were beginning to pay off.

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Lord Simon Wolfson
Lord Wolfson is chief executive of retail giant Next (Next/PA)

He told the Press Association the worst of the Brexit-fuelled price rises on the high street were also over.

He said the impact of the Brexit vote “doesn’t look like it’s fuelling an inflationary spiral and is passing right through”.

A prominent Leave campaigner, Lord Wolfson said 2018 will see an end to price rises, with the group predicting stable prices in the autumn.

Next put up prices by 4% on average for its spring and summer season this year, but is pencilling in a rise of 2% for next spring and summer, with prices remaining flat at the end of 2018.

Lord Wolfson added that the benefit of the weak pound will start to be felt next year as it boosts exports.

“The bad news will be this year and the good news next year,” he said.

Next is forecasting full-year profits of around £717 million, up from £710 million previously, although this would still mark a drop on the year before.

It said sales could fall by up to 2% or rise by 1.5% over the year, having previously warned of a fall of up to 3%.

Lord Wolfson said: “The first half of the year has been difficult and sales and profits are in line with our cautious expectations.

“However, our performance in the last three months has been encouraging on a number of fronts and whilst the retail environment remains tough, our prospects going forward appear somewhat less challenging than they did six months ago.”

Next has been helped by the warmer weather in the summer, together with an overhaul of its product ranges and online offering,  which helped total full-price sales rise by a better-than-expected 0.7% in its second quarter to July 29.

Lord Wolfson said it was “not impossible” that high street sales could rise again in its third quarter, especially as it comes up against very weak comparatives from a year earlier.

But he said trading may ease back again in the fourth quarter as the comparatives become stronger.