A muted, but impressive, performance from high street fashion stalwart Next has seen group sales reaching £4.1497 billion (£4.1769 billion on a 53 week basis).

Sales were boosted by continued strong growth from its Directory business and ongoing store rationalisation  – with net new stores contributing 2.4 per cent to growth.

The retailer’s emphasis on addressing problems with availability that have plagued it over the last year are showing early positive effect on Next profit. The company’s retail margins inched forward by 0.6pp to 16.9 per cent, and retail operating profit reached 4.8 per cent, aided in part by Next’s resistance to excessive discounting which led to full-price sales rising 2.2 per cent.

The retailer must continue to take more risks with buying and design, buying closer to the season, and being more flexible with phasing, both of which it admits will require a big cultural shift internally.

Next Directory remains the engine for the business, with operating profit growth of 7.5 per cent and full price sales growth of 6.5 per cent, though net margin declined by 0.1percentage points. While Next’s online offer and fulfilment options remain one of the strongest on the high street, competition from rivals has intensified. Next must become more agile in terms of product availability and newness, especially as it acknowledges consumers have switched to buying more from mid-season ‘new-in’ ranges. Its recent move to optimise its website for mobile and tablets is a step in the right direction, and aligns it better with customers’ changing shopping habits.

Despite its ongoing success, Next is wary of the challenges ahead, especially in terms of sustaining its stellar growth in Directory. Full year guidance for Next sales and Next profit have been revised in light of its cautious outlook for the economy and shift away from cyclical spend on clothing.

However, its product remains appealing and there is potential for growth from its menswear, Label and home segments, indicating Next can continue to make gains in 2016/17.

• Nivindya Sharma is an analyst with Verdict Retail.