Fashion giant Next has said it witnessed weak sales in August as customers saw the cost of living surge and is now set to miss sales and profit targets.

The high street retailer told investors on Thursday that August was “below our expectations” and cost-of-living pressures on customers are expected to “rise” in the coming months, ahead of the key Christmas period.

It said profits are now expected to be around £840 million for the current financial year, downgrading a previous projection of £860 million.

Next added that it “seems inevitable” that growth in the clothing and homeware sector “will slow if not reverse” as inflation starts to bite.

It revealed that prices across its autumn and winter range have been increased by 8% as it passes on some of the impact of higher costs to customers.

Amanda James, finance director at Next, said it is “too early” to say if these increases are putting off customers.

“These were fed through from August and if we had seen the weakness that month continue to September maybe you could link the performance to prices,” she told the PA news agency.

“But I think the improvement in September proves it is not simply that and we saw a strong performance in the first half of the year, where we had implemented 4% price price increases.”

The group said it has seen some costs, such as freight and logistics, ease in recent months.

However, it added that weakness in the pound – which struck an all-time low against the dollar earlier this week – could persist into next year and would “serve to inflate selling prices, particularly in the second half of the year”.

Next said it believes weakness over August was likely to have been related to the heatwave following its summer sale, more customers taking holidays abroad and the “waning of consumer confidence as increasing energy and other costs begin to dampen demand for discretionary spending”.

The group stressed that it saw a better performance in September and may improve further as Government support for households kicks in.

It came as the company revealed that full price sales increased by 12.4% over the six months to July, compared with the same period last year.

Meanwhile, pre-tax profits increased by 15.5% to £400.6 million for the half-year.