However, the fashion chain also raised its profit forecast for the current year, as it highlighted strong online sales in the past eight weeks.
Next told investors that online sales over eight weeks from the start of February were “stronger than expected” and more than 60 per cent ahead of the same period two years ago.
The retailer said it is therefore expecting to post a pre-tax profit of £700 million for the current financial year, up from its previous target of £670m.
Outlining its outlook for the year, the group said it believes the consumer economy, at least in the short term, “will be healthier than many presume”.
Chief executive Lord Simon Wolfson said it seems likely that a “combination of pent-up demand along with a healthy overall increase in personal savings” will help to buoy consumer spending.
The group said it is also working on the assumption that vaccine rollout will mean that its stores will remain open for the rest of the year.
However, it said it is unlikely to meet its sales and profits guidance for the year if this does not prove correct.
John Moore, senior investment manager at wealth management firm Brewin Dolphin, said: “It has almost become expected that Next will deliver ahead of guidance and, despite the highly challenging trading conditions of last year for most retailers, it has done so again.
“As a destination people want to visit, Next is likely to be among the biggest beneficiaries as the economy re-opens; but its growing online business, integrated logistics offering, and add-ins like its Total Platform service for other brands give it a strong anchor in the online economy.”
Steve Clayton, fund manager of the Hargreaves Lansdown Select funds, which hold Next shares, noted: “Profits may have more than halved, but to be reporting any sort of profit at all as a fashion retailer after a year like 2020 is a remarkable achievement. But Next is a remarkable business.
“The group saw the potential of online retailing years before their rivals took it seriously. As a result Next was earning most of its money online, even before the pandemic struck. That has left it in a far stronger position than rivals like M&S (loss-making), or Arcadia and Debenhams (both now bankrupt).”
Next said that its pre-tax profits slid by 54 per cent to £342m for the year ending in January, compared with the same period last year.
It said this slump was driven by Covid-19 costs and lower sales due to lockdown restrictions, with group sales dropping by about 17 per cent to £3.6 billion for the year.
Chairman Michael Roney said: “I believe that in difficult times there is a clearer separation between the stronger corporate performers and the weaker ones.
“This result is due to the formation of a good management team and the establishment of robust processes during less volatile periods.”