Next has increased its full-year profit guidance after Christmas sales came in at £70 million more than expected, but has warned of price increases in the coming months because of higher freight and manufacturng costs.

The fashion and homeware retailer expects its prices to increase by almost 4 per cent this spring and summer, while the price of its autumn ranges will be 6% ahead of last year. Average wages across the group are set to rise by 5.4%, driven by the increase in the legal minimum wage from April and shortages of warehouse and technology workers.

Sales during the eight weeks to Christmas Day were 20% higher than in 2019 – prior to the Covid pandemic – despite “materially lower” levels of stocks caused by labour shortages in its warehouses and distribution networks.

READ MORE: Next says shortfall in seasonal workers threatens to hamper festive services

“The fact that our sales remained so robust in these circumstances is, we believe, testament to the strength of underlying consumer demand in the period,” the company said.

Issuing its fifth profit upgrade in less than a year, Next said it expects to make £822m for the year as a whole, £22m more than previously hoped for and almost 10% ahead of pre-pandemic levels.

The company was boosted by a surge in online orders of party dresses and occasionwear which made up for a decline in trade at its physical stores. Full-price online sales in its Label business - which sells brands such as Ted Baker, Nike and Mint Velvet - were 85% higher than in 2019, while online sales of Next goods in the UK and overseas were up by more than 30%. Sales in its UK and Irish stores fell by 5.4%.