LONDON BRIEFING:Debenhams and Next shares surged after their Christmas trade merely disappointed, but as Waterford and Woolworths showed, it could always be worse

YOU KNOW you're in the grip of recession when two of Britain's biggest retailers report a fall in trade over the crucial Christmas sales season, only to be hailed as heroes of the high street.

Shares in debt-laden department stores group Debenhams and the fashion chain Next surged yesterday as their festive trading figures came in ahead of analysts' expectations.

That doesn't mean they had a good Christmas - far from it - just that it could have been a great deal worse. For Marks Spencer, which updates the City today, it probably will be, with widespread expectations of dire figures accompanied by heavy job losses.

At Next there was a surprise increase in sales of its Directory, but its high street chain suffered a 7 per cent slump in underlying sales between August and Christmas Eve. At Debenhams the fall was 3.5 per cent, but chief executive Rob Templeman claimed that the chain had continued to win market share from its rivals.

He highlighted a new breed of shopper - the "recessionista" - who is trading down from the top end to more affordable luxury goods, such as the Designers at Debenhams range, which enjoyed a double-digit sales jump.

Both Debenhams and Next said their profits would be in line with City expectations, despite the Christmas sales decline. But prospects further out look grim - although Next's Simon Wolfson cautioned against some of the gloomier economic forecasts, he warned that the first half of 2009 will be even tougher.

The two retailers adopted very different approaches to trading over the crucial December period. Almost alone in the high street, Next held its nerve and refused to join in the feverish pre-Christmas price-cutting, starting its clearance on Boxing Day, while Debenhams held a series of three- and five-day spectaculars throughout December and began its January sale online on Christmas Day.

Both strategies appear to have worked. Although sales went into reverse, margins were largely maintained and thus profits have been protected.

The sharp share price rises for both Next and Debenhams yesterday - up more than 30 per cent at one stage - smack of over-reaction in a sector that has become accustomed to hard times. Anything less than a bloodbath might appear to be good news, but it would be prudent to hold off the celebrations until sales start moving ahead again. And that might be quite some way off.

THE COLLAPSE of Waterford Wedgwood this week, just short of its 250th anniversary celebrations, sparked an outpouring of nostalgia and regret on both sides of the Irish Sea. How could such a famous name, with such a proud history, be allowed to fail?

As the demise of Woolworths has already demonstrated, household-name status affords little protection to a failing company when unsentimental bankers demand their cash back.

Wedgwood may have been founded in 1759, and Waterford in 1783, but the two businesses have been living on borrowed time for years; without the support of the O'Reilly millions they would have gone under a long time ago.

Just as Woolies was overtaken and outclassed by the supermarkets, which did everything so much better and so much cheaper, so Waterford Wedgwood was left behind by changing tastes and cheaper rivals.

How many of those who mourned the passing of the 99-year-old variety store chain had even visited one of the stores in the past year, let along bought something?

And how many who expressed their sadness over the collapse of Waterford Wedgwood this week could say they had splashed out in recent years on a set of glasses or dinner service?

Brides no longer include Waterford or Wedgwood products on their wedding lists, and Wedgwood even missed out last year on the main contract to supply commemorative mugs and plates for the 2012 London Olympics.

The lucrative contract was instead awarded to a Chinese company with a cheaper quote.

There are still hopes that the famous Waterford Wedgwood name will attract a buyer, with interest being shown from several potential purchasers in the United States.

But even if a deal can be reached - and that is by no means certain, given the company's huge debt and less than rosy prospects - the business would survive only in a radically slimmed-down form.

Meanwhile, in a final irony, expect sales of Waterford crystal and Wedgwood crockery to surge in the coming weeks on the back of the publicity over the firm's demise.

That's certainly what happened at Woolies, which closed its doors for the final time yesterday after having enjoyed record trading in its final few weeks on the high street.

If only nostalgia paid the bills.

• Fiona Walsh writes for the Guardian newspaper in London