“At the moment, what’s going on with the sovereign debt crisis in Europe isn’t affecting consumers,” Next Chief Executive Simon Wolfson said.

“There’s a chance it could happen, of course ... It’s not going to be good news (for retailers) but on the other hand it’s unlikely to dramatically affect the fundamentals such as inflation and employment.”

“(But) it almost inevitably would put a further squeeze on lending in the UK.”

He was speaking after Next, which has some 500 stores in Britain and Ireland as well as the Directory home shopping business, raised its full-year guidance after an 8.5 percent rise in half-year profit, lifting its shares 6.25 percent.

With the caveat of no further shocks from worsening European sovereign finances, Wolfson, who was made a Conservative party working peer last year, sees no reason for any dramatic change in the UK consumer environment in 2011, and expects improvement in 2012 as inflationary pressures moderate.

“Any recovery in spending is likely to be slow and take a long time, but it seems reasonable to believe that by the second quarter of next year we will begin to see some recovery in the consumer environment,” he said.

Having negotiated a third of its prices for spring 2012, Next is confident there will be little or no inflation in its selling prices in the first half of 2012.

“I think it’s unlikely there will be any significant decrease in prices because, although capacity constraints are easing in the Far East and new areas are opening up, we’re still seeing quite significant wage price inflation, particularly in China,” said Wolfson.

Next made an underlying pretax profit of 228 million pounds ($360 million) in the six months to July 30.

That compares with analyst forecasts of 205-238 million pounds, according to a Reuters poll, and 213 million in the same period last year.

Next, which battles the mid-market with sector leader Marks & Spencer , said revenue rose 3.6 percent to 1.57 billion pounds.

Sales at Next stores fell 1.7 percent, while Directory sales leapt 15.1 percent.

The firm said it now expected underlying pretax profit of 545-590 million pounds in the year to end-January 2012, up by between 0.4 percent and 8.7 percent on the 2010-11 outcome.

Earnings per share jumped 18.6 percent to 98.3 pence, boosted by buybacks.

Next ended the half with net debt of 640 million pounds and is paying an interim dividend of 27.5 pence, up 10 percent.

“Next continues to have significant attractions of demonstrated EPS growth in difficult markets, a strong balance sheet, defensiveness and strong strategic assets,” said analysts at Credit Suisse.

Also on Wednesday, John Lewis , which owns department stores and the Waitrose supermarket chain, reported an 18 percent drop in first-half profit, hit by discounting and a step-up in investment.