Marks and Spencers set for downgrades

City stockbrokers are set to downgrade Marks and Spencer after a leaked report suggested its problems are even more serious than first thought.

The report showed M&S's pre-tax profits for the financial year 2000-2001 could total £430m, compared with the £418m reported for the previous year.

This could lead to a raft of downgrades from City stockbrokers as many in the City had expected a figure at least £20m higher.

The leaked report also indicated sales of ladieswear had slumped owing to a series of price cuts, and that the retailer lost £109m in its annual winter sale.

It also showed a fall in UK operating profit, and suggested that M&S's overseas stores, which it has now decided to close, were performing much better.

A spokesman for M&S said the figures covered trading over the first nine months of the retailer's financial year, to December, and that they were already in the public domain "in some way, shape or form".

He added: "We have not made any secret about the performance of our business, which supports the need for the radical restructuring we announced last month. "

Only 30 people are likely to have seen the report, including divisional directors and senior employees within the finance department as well as the retailer's 13 board members.

The spokesman said: "In any time of uncertainty, there will be some employees not willing to accept the necessary change.

"It is unfortunate and sad, however, that anyone would leak information in an attempt to harm the business and the other 55,000 employees of M&S."