The FTSE 100 (^FTSE) fashion retailer said the decline in the British currency looked set to prolong inflation, even once producer prices start to come down.
"It looks like we may be set to have two cost of living crises: this year, a supply side led squeeze, next year a currency led price hike as devaluation takes effect," Next said.
Sterling has shed around a fifth of its value against the dollar so far this year, and shares in the London-listed group lost around a third during the time.
The warning came as it cut its profit and sales guidance for the year after weak trading in August.
Next said that the squeeze on consumer budgets was likely to worsen in the coming months, ahead of the key Christmas period.
It forecast profits of £840m ($905m) for the current financial year, down from a previous projection of £860m.
Next believes the weakness last month was likely to have been related to the heatwave following its summer sale, more customers taking holidays abroad and the "waning of consumer confidence as increasing energy and other costs begin to dampen demand for discretionary spending".
However, the retailer stressed that it saw a better performance in September which may improve further as government support for households kicks in.
Full price sales increased by 12.4% over the six months to July, compared with the same period in 2021, while pre-tax profits increased by 16% to £401m for the half-year.
Sales are expected to fall 1.5% in the second half of the year, against previous forecasts of a 1% rise.
Next, whose chief executive Lord Simon Wolfson is a Conservative peer, said "it seems inevitable that clothing and homeware growth will slow if not reverse" despite high levels of employment and savings.
"It is too early to tell what impact government support will have, though it seems likely that the scale of the measures announced recently will serve to support spending in some way," Next added. "Looking into next year it now looks as though the weakness of the pound, if it continues, will serve to inflate selling prices, particularly in the second half of the year."
The retailer has already indicated that clothing prices would rise by around 6% this autumn due to higher factory gate and freight costs as UK inflation hovers near 40-year highs.