Clothing and homeware retailer Next is predicting difficult months ahead after a 5.5 per cent fall in profits to £790 million in the year to January.

Sky News reported that Next had warned of weaker profits earlier this year after its Christmas trading performance missed forecasts.

Next chairman John Barton said it had been a challenging year for the company which is set to open a flagship store at the Peel Centre, Gloucester (see artist's impression). There is currently a Next Clearance store in Gloucester Quays, as well as stores in Cheltenham and Quedgeley.

Clothing sales have been hit by rising prices and a tightening of family budgets.

The Next chairman said: "The year to January 2017 was a challenging year for Next.

"Whilst total sales for Next Retail declined by 2.9 per cent sales for Next Directory increased by 4.2 per cent. Total group sales were broadly flat at £4.1billion for the year. Cash flow remained strong and we returned £502million to shareholders through a combination of ordinary dividends (£226m), special dividends (£88m) and share buybacks (£188m).

"We have continued to invest in the business, spending £161million on new stores, warehousing and systems. Net debt increased to £861million, well within our bond and bank facilities of £1.4billion.

"Trading conditions in the year ahead will continue to be tough, however I believe that by focusing on our core strengths, as we did during 2008, we will see Next emerge from this period stronger than before."