Fashion chain Next’s shares have dropped 6% with investors disappointed by its latest trading update.

The High Street retailer warned the market “remains challenging” as it reported a 2.5% drop in total sales for the past three months.

Next also cut the top end of its profit forecast, and now expects full-year profits of between £680m and £740m compared with an earlier forecast of £680m to £780m.

Store sales fell by just over 8%.

However, its overall performance was buoyed by its Directory sales, which rose 3.3% for the 13 weeks to 29 April.

“The UK consumer environment remains challenging, particularly in the clothing and homeware markets, and real wage growth is now close to zero,” Next said in its trading statement.

The weak performance was expected after the retailer had warned in March of “another tough year ahead”.

In March, Next reported its first drop in annual profit for eight years and said it remained “extremely cautious” about trading.

The chain had also warned that by focusing energy on “adopting exciting new trends” it had omitted some of its “best-selling, heartland product from our ranges”.

In its latest update, Next said its fashion ranges would still not be where “we wanted them to be until the Autumn season in September”.

“We still believe this to be the case,” it said.