Clothing retailer Next is believed to have lost as much as £3 million through fraud between late 2005 and early 2006.

The revelation came as Next reported its sales figures for the first half of 2006. The fashion retailer’s profits were up by 11 per cent, but sales at the company’s subsidiary Directory, which is largely web-based, fell by three per cent in the past six weeks, the company said.

Chief executive Simon Wolfson, who unveiled the figures, blamed this drop on changes made to the credit vetting process of applicants for the Next Directory after suffering what was described as “significant fraud”.

Wolfson did not disclose what types of fraud occurred at the company but said there had been “several loopholes” in the way the firm gave customers credit.

Next could not be reached for comment.