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UPDATE 2-Happy Christmas for Next lifts UK clothing retailers

* Next beats guidance for Christmas sales

* Upgrades full-year profit forecast

* Next shares rise up to 10 percent

* Shares in rivals also rise after first retailer reports (Adds detail, CEO, analyst comment, shares)

LONDON, Jan 3 (Reuters) - British clothing retailer Next raised its full-year profit forecast after beating guidance for Christmas sales with a helping hand from colder weather, sending shares across the sector higher on Wednesday.

Next shares were up 9.2 percent at 0851 GMT, while shares in high street rivals Marks & Spencer, Debenhams and Primark owner Associated British Foods gained 2.1, 3.4 and 3.0 percent respectively.

With Britain's consumers being squeezed by slow wage growth and the jump in inflation that followed the 2016 Brexit vote, expectations for Christmas spending had been subdued.

Next, the first major listed retailer to update on festive trading, defied the gloom, reporting full price sales growth of 1.5 percent in the 54 days to Dec. 24, the bulk of its fiscal fourth quarter.

That was ahead of company guidance for a fall of 0.3 percent and follows third quarter growth of 1.3 percent.

"We think Nexts (statement) should be a positive read for the UK general retail sector and online retailers such as ASOS ," said RBC Europe retail analyst Richard Chamberlain, who has a "sector perform" rating on Next.

FAMILIAR CHALLENGES

Next Chief Executive Simon Wolfson told Reuters he was "a lot more confident" about the retailer's prospects than he was a year ago when the company issued a profit warning.

He did, however, caution that many of the challenges Next faced in 2017 look set to continue in the new year.

Wolfson said subdued UK consumer demand driven by a decline in real income, the increase in spending on leisure at the expense of clothing, and inflation in cost prices all remained difficult.

Next trades from more than 500 stores in the UK and Ireland and operates the Directory internet and home shopping business.

It has been Britain's most successful clothing retailer this century in terms of profits but has faltered over the last two years due to a shift in spending away from clothing towards holidays and entertainment.

Next shares had fallen 7 percent over the last year prior to Wednesday's update.

The retailer upgraded its central pretax profit guidance for the full 2017-18 year, forecasting 725 million pounds ($985.5 million), up from previous guidance of 717 million pounds but well below the 790.2 million pounds made in 2016-17.

Next forecast full price sales growth of about 1 percent in the 2018-19 year and another fall in profit to 705 million pounds, with costs growing faster than sales.

But it also flagged a 300 million pounds share buyback in 2018-19 that would boost earnings per share. ($1 = 0.7357 pounds) (Editing by Kate Holton and Keith Weir)