Next expects to make an annual profit of as much as £700m on the back of the festive season.
Britain’s second largest clothing retailer said that sales over the fourth quarter were “significantly ahead of expectations” and it has raised its full-year profit forecast to between £684m and £700m.
The company, which has a policy of not discounting before Christmas, saw retail sales from the November 1 until December 24 up 7.7%.
Total sales for the period rose 11.9%, compared with a rise of 4.3% in the third quarter.
Its web-based operation, Next Directory, performed particularly well with sales up 21%.
The company attributed this to increased confidence in online deliveries with orders being placed right up to the weekend before Christmas.
However, it cautioned that the strength shown would be unlikely to continue through the first half of the new financial year because wages are still not growing.
Next, which has more than 500 stores across the UK and Ireland and around 200 stores in more than 30 countries around the world, is to issue a special dividend of 50p per share from surplus cash which will be paid to shareholders on February 3.
It expects to generate a further surplus of £300m in the coming year which it will distribute in a similar way or via buybacks – a way of increasing the value of outstanding shares by reducing the number of shares in the market – depending on the share price.
The share price hit an all-time high on Friday and looks set to overtake Marks & Spencer as Britain’s number one clothing retailer.
Its fortunes are in stark contrast to high-street rival Debenhams, which has been forced to slash prices after issuing a profits warning following poor Christmas sales.
Shares in the department store chain plunged after it disclosed profits of nearly £30m lower than last year.