UPDATE 2-Return to sales growth sends Next shares soaring

* First quarter full price sales rise 0.7 pct

* Shop sales fall 7.4 pct, Directory up 11.4 pct

* Edges up sales forecast, profit guidance maintained

* Shares rise as much as 12 pct (Adds CEO, analyst comment, shares)

LONDON, Aug 3 (Reuters) - British clothing retailer Next returned to sales growth in its latest quarter, helped by warm weather in June and July and a surge in online sales, sending its shares sharply higher.

The stock, which had fallen 20 percent over the last year, rose as much as 12 percent on Thursday after Next also edged up its sales guidance for the full 2017-18 year and maintained profit guidance. Next had cut guidance in January and May.

Britain's most successful clothing retailer this century, in terms of profits, has faltered over the last two years due to a broader slowdown in spending on fashion and footwear that it first identified in 2015.

It has previously warned sales would suffer this year due to a squeeze in consumer spending as inflation erodes earnings growth, and price rises on garments following the pound's slide.

Im marginally less pessimistic than I was three months ago and its encouraging to see some of the improvements coming through on Directory," Chief Executive Simon Wolfson told Reuters, referring to the group's online business.

"But I still think were in a very difficult consumer environment for clothing, so were being very cautious about the rest of the year," he added.

Wolfson said that while he expected price increases to moderate next year, it was much harder to predict when consumers would start spending more on clothes.

"Were not expecting it this year," he said.

Next's full price sales rose 0.7 percent in the second quarter to July 29. That compared with a fall of 3.0 percent in the previous quarter and analysts' expectations of a similar decline.

Though full price second quarter sales at Next Retail stores fell 7.4 percent, they were up 11.4 percent at the Directory catalog and internet business, with strong sales both in the UK and overseas. The company did not give sales values; Directory accounts for about 40 percent of the group total.

"The majority of the boost we got was from much better weather," said Wolfson, a Conservative Party member of Britain's upper house of parliament and a supporter of Brexit.

He said some improvement in ranges and in Directory's online functionality, such as personalized home pages and a new mobile site, also helped.

Although UK retail spending is shifting online, Next is continuing to expand its store base, believing the risk is that shops become less productive, but not loss making. A further 150,000 square feet (14,000 square meters) of selling space is targeted for 2017-18 and 250,000 sq ft the following year.

"Bears will point to ongoing weak trading within (Next) Retail we think this misses the point that Next is a well-invested business that ... has the operational flexibility to deal with structural challenges posed by the sectors shift online," said Investec analyst Alistair Davies, who has a "buy" rating on the stock.

Next narrowed its 2017-18 sales guidance range to down 3.0 percent to up 0.5 percent, from down 3.5 percent to up 0.5 percent previously.

Profit guidance of 680-740 million pounds was maintained - an outcome that would represent a second straight year of decline.

Next shares were up 7.4 percent at 4,309 pence at 0930 GMT, valuing the business at 6.4 billion pounds ($8.5 billion).

Rival Marks & Spencer was up 1.1 percent, Debenhams up 1.7 percent and Primark owner AB Foods up 1.3 percent.

($1 = 0.7549 pounds)

(Editing by Kate Holton and Mark Potter)