Fashion retailer Next upped its full-year profit guidance by £25 million today after better-than-expected first-half sales, leaving it on course to extend its lead over Marks & Spencer.

The group overtook its more-established rival with a £695 million profits haul earlier this year and said it was now on course to lift this to between £775 million and £815 million - with analysts expecting M&S to make £663 million.

Shares rose 2% after Next said sales for the first half to July 26 were 10.7% ahead, with 2.4% coming from new space.

Retail sales rose 7.5% - though this increase was slower in the second quarter than the first. The group's catalogue and online division boosted revenues by 16.2%, including a stronger second quarter.

The company said sales were ahead of its 5.5% to 9.5% full-year guidance and that it was raising this range to 7% to 10%.

Next said the guidance "might appear overly cautious" but pointed out that the first-half performance compared with a period last year when sales were hampered by very cold spring and Easter weather.

It said the final quarter of the year would be a "challenging comparison" and guidance for the next six months was for sales growth of 4% to 10%.

Next also said it was continuing to return cash to shareholders, following special 50p dividends in February and May, with a third being paid this week, though no more are anticipated in the current year.

It means the group has now paid or declared £223 million of special dividends and also returned £105 million through share buybacks, in the year so far.

Last month, Next was hit with the resignation of long-serving executive Christos Angelides. The product director, who has played a key role during three decades with the firm, is leaving to join US retailer Abercrombie & Fitch.