By James Davey

LONDON (Reuters) - The country's second-largest clothing retailer Next (NXT.L) is simply being realistic in predicting that its underlying sales will deteriorate further in the next few months, despite an improving economic backdrop, its chief executive said on Wednesday 16 September.

"We may technically be in or out of recession but either way the vast majority of consumers haven't got more to spend this year than they had last year," Simon Wolfson told Reuters in an interview on Thursday 10 September after the firm announced its results for the six months to July 31.

Next maintained its forecast that like-for-like retail sales will fall by 3.5 to 6.5 percent in its second half to end-January, but raised margin and profit guidance. "I'm not worried about planning (too) conservatively and I do think those numbers are realistic," he said.

"Also what we've proven is that if sales do come in better than expected, and in the first half they came in about 6 percent better than we originally planned, we can chase and still get the stock," said the CEO.

He said he was "not overly concerned" by the prospect of the UK's VAT sales tax going back up to 17.5 percent in January after a year at 15 percent.

"We've planned it into our margins," he said. "It was a relatively small movement (in sales) when it was introduced and it will be a relatively small movement when it comes back in."

But Wolfson took some comfort from the receding threat of the swine flu outbreak in Britain.

"It wasn't as widespread as some people had been predicting and the illness itself wasn't as dangerous as some were predicting. That meant it didn't really affect consumer behaviour," he said.

He is also hopeful that other retailers will this year, unlike last year, follow Next's longheld policy of not discounting in the run-up to Christmas.

"I would hope that will be the case and I think there's every likelihood that it will be the case. I think most retailers are planning (stock) on a conservative basis for autumn/winter," he said.

Wolfson, a prominent supporter of the opposition Conservative Party and co-chair of its economic competitiveness policy unit, would not be drawn on the possibility of him taking a government job were the party to win the general election due in 2010.

"I'm not going to answer any hypothetical questions. What I can say is I haven't been asked to do anything else. I'm really enjoying what I'm doing at the moment," he said.

Shares in Next, which have increased by nearly a half over the last six months, were up 3 percent at 1748 pence at 0856 GMT, valuing the business at 3.49 billion pounds.

(Editing by Greg Mahlich)