Retailer Next has said festive sales were better than expected, but warned over a £58 million profit hit from the new national lockdown.

The fashion and homewares chain said that while full-price sales fell by a far better-than-feared 1.1% over the nine weeks to December 26, the trading boost will be “almost entirely” wiped out by the third English lockdown.

It is predicting £18 million in lost profits across January as 90% of its stores will have to close, with a further £40 million from the closure of stores in February and March.

The group warned that total full-price sales are set to tumble by 14% in January, which will leave full-year sales 16% lower.

Despite this, the group said it now expects pro-rata 52-week annual profits of £370 million for the year to the end of January, against £365 million previously pencilled in.

Profits on a 53-week basis will be knocked further by a £40 million property provision and are expected at £342 million.

It is also forecasting a resilient performance for 2021-22, pencilling in profits of £670 million for 2021-22 as its impressive online performance offsets the store woes.

Its central forecast is for 2021-22 sales to remain flat on its pre-pandemic year thanks to an expected recovery in the final six months of the year.

Shares jumped as much as 10% before settling around 6% higher as the trading cheer offset the hammering on the high street expected by the latest lockdown.

Next had been braced for an 8% drop in Christmas sales, but its online performance has helped offset store closures.

It said online sales leaped 38% higher over the full quarter to December 26, helping limit the overall sales fall to 0.5%.

Profit gained from the overperformance in November and December has been almost entirely offset by the anticipated loss of full price retail sales in January due to the lockdown closure of 90% of our stores

Profits were on track to hit £393 million before the profits blow from the latest lockdown and a £5 million impact from higher costs of switching its end-of-season sale online.

The group said: “Profit gained from the overperformance in November and December has been almost entirely offset by the anticipated loss of full price retail sales in January due to the lockdown closure of 90% of our stores (and) the additional costs we have incurred clearing more of our retail end-of-season sale stock online.”

Next also cautioned that it was seeing stock delays of up to three weeks due to pandemic disruption on shipments from the Far East, which has left stock levels 10% lower than two years ago.

It expects stock issues to “steadily improve” and return to more normal levels by the end of March.

Next added Brexit had not yet caused any disruption and was not likely to impact imports or exports over the year ahead.

Retail expert John Stevenson, at Peel Hunt, said: “Next has outperformed expectations, despite the impact of Lockdown 2, Tier 4 and now Lockdown 3.

“Once again, this shows the relevance of the brand and Next platform to UK households.”

Steve Clayton, fund manager of the HL Select UK Equity funds, said: “Next is now predominantly an online retailer, having made big strides early on to embrace the internet, strides that have left it far better placed than most of its high street rivals can dream of.”