HIGH street fashion chain Next promised better-than-expected profits after new stores helped it battle through a tough Christmas season.

The chain said its 85 new shops and a recovery from its worst high street performance in a decade helped lift total sales by 9.8 per cent on a year ago in the five months to Christmas Eve.

It prompted Next, which was also boosted by soaring sales in home shopping, to forecast pre-tax profits for the year to January 28 to be between £435m and £450m. This was better than both the £4200m expected in the City and last year's figure of £423m.

Shares in Next surged eight per cent with the news yesterday, while Marks & Spencer was buoyed after it returned above the £5 barrier with a gain of more than one per cent.

Private retailer New Look, the UK's third largest womenswear company, also posted a resilient performance today, as it reported a 9.2% rise in sales in the 39 weeks to Christmas Eve thanks to an increased number of stores.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: "The market has been desperate for some good news in the retailing space and these numbers have served it up on a plate."

Next - the first in a raft of stock market listed retailers to give a seasonal trading update - said that while its new stores helped boost business towards the end of the year, there was also an improvement in its well-established outlets.

Like-for-like sales in the 251 stores unaffected by new openings were 3.2% lower, but this compared with a previous fall of 6% reported in September - Next's worst performance in a decade.

Barclays Stockbrokers researcher William Hobbs said: "Considerable confidence can be taken from the company's impressive performance since the dire September trading statement."

The UK high street has had a difficult year with consumer confidence down amid rising levels of personal debt and utility bills and stagnating house prices.

And Next, which increased its retail floor space by a third in 2005 to four million square feet, and now has 415 stores, said it remained "cautious" for the first half of 2006.

"Whilst we expect to grow sales from the addition of new space, we are budgeting for like-for-like sales to continue to run at approximately minus 3% over the next six months," the company said.

Despite the warning, today's forecast of increased profits was welcomed by investors and the City.

Seymour Pierce analyst Richard Ratner said: "We have been pointing out for a while the likelihood of Next producing decent figures because of the profitability of new space and the directory.

"Even if one is nervous about the space expansion programme, the shares are too cheap."

And Panmure Gordon analyst Philip Dorgan targeted a share price of 1750p, compared with last night's closing price of 1523p.

"We believe that 2006 will be a good year for the Next share price," said Mr Dorgan.

Next's update came a day after a second set of research figures showed that shoppers had deserted the high street in the first week of sales after Christmas.