Fashion group Next today blamed the economic downturn for a 14 per cent drop in annual profits, to £428.8 million.

The chain reported total sales were £3.27 billion in the 12 months to January 31 – down from £3.32 billion the previous year.

Chairman John Barton said the company faced a difficult year ahead as the recession continued.

"Trading conditions in the year ahead will continue to be tough," he said.

Profits at the company's stores were down by £31.1 million, to £288.8 million.

The group's Next Directory mail order arm saw profits fall by £6.8 million to £157.6 million, despite sales rising by 2.1 per cent.

The company increased store space by 305,000sq ft over the year, increasing the number of shops to 510.

Chief executive Simon Wolfson said the group faced a double whammy of economic downturn and higher material costs because of the weakness of the pound.

He said: "2009 presents a double challenge. Weakness in the general economy means we must plan for a fall in like-for like-sales for the full year.

"In addition, the weakness of sterling will put strong upward pressure on cost prices."

However, Mr Wolfson suggested the doom and gloom in the economy may have been overplayed, though he said the recession would continue for another year.

He said: "While we remain cautious in our outlook for the year ahead, we believe perhaps the economic gloom has been overdone."

Next, founded in 1982, employs 2,500 people in Leicestershire, including at its Enderby HQ.