Next, Britain's second biggest clothing retailer, said it was being cautious in its budgeting for the 2012-13 year as the outlook is very uncertain, highlighting concerns over employment, credit availability and the euro zone debt crisis.

The firm said on Thursday it expected underlying retail sales will remain negative, with total sales up modestly, driven by new space and its Next Directory business.

Next is budgeting for total sales to rise 1 to 4 percent in its first half and full year and sees stable full-year margins.

It predicted full year pretax profit in a range of 560-610 million pounds and earnings per share growth of 3 to 12 percent.

Next trades from over 500 stores in the UK and Ireland, over 180 stores in over 30 countries overseas and the Directory catalogue and online business.

It made an underlying pretax profit of 570.3 million pounds ($903.8 million) in the year to end-January 2012.

That compares with company guidance of 558-572 million pounds and 543.4 million pounds in 2010-11.

Underlying earnings per share rose 15.1 percent to 255.4 pence, driven by a lower tax rate and share buybacks, while the dividend increased 15.4 percent to 90 pence.

Total revenue rose to 3.50 billion pounds from 3.45 billion.

Many British retailers are struggling as disposable incomes are squeezed by rising prices, muted wages growth and government austerity measures, and as shoppers fret about job security, a shaky housing market and the euro zone debt crisis.

Next has fared better than most during the economic downturn, with growth driven by the success of its Directory business.

Shares in Next, which have increased by a half over the last year, closed Wednesday at 2,894 pence, valuing the business at 4.86 billion pounds. ($1 = 0.6310 British pounds)

(Reporting by James Davey; Editing by Paul Sandle)