Fall in sales for Marks & Spencer

Retail giant Marks & Spencer today reported its worst quarterly trading for more than two years as it revealed a 2.2% drop in Christmas sales.

M&S boss Stuart Rose said market conditions became tougher in November and December as he unveiled the drop in third quarter like-for-like sales - the group's first in nine quarters.

He also warned of difficult trading to come in 2008, confirming fears of a consumer spending slowdown on the high street.

M&S said it held its market share in food and general merchandise, even though like-for-like sales were down 1.5% and 3.2% respectively in the 13 weeks to December 29.

The group-wide fall in like-for-like sales came in far worse than expected in the market however, with most analysts looking for a rise of around 1%.

Last year, the retailer clocked up a rise in third-quarter sales of 5.6%.

Rose stressed that the retailer had not resorted to heavy price cuts to drive sales, although he added that M&S prices had fallen by 6%.

He said: "We did not discount in the run-up to Christmas.

"Stock levels were well controlled over the period, we had a strong start to the Christmas sale and sales stocks have now cleared."

Online sales between October and the end of December rose 78%, while international sales lifted 15.1%.

M&S reported a dip in sales of clothes - down 1.2% - despite an all-star line-up for the group's Christmas advertising campaign.

Hollywood star Antonio Banderas featured in its festive ads, alongside celebrity models Twiggy and Erin O'Connor.

M&S also scooped a coup by signing up pop quartet Take That to front its Autograph menswear campaign last autumn, while Victoria "Posh Spice" Beckham helped create a top-seller by being seen wearing an M&S black leather dress.

Like-for-like sales growth has been declining since the start of last year, but M&S put faith in its store revamp programme to help boost trade.

The group has overhauled around 70% of its stores since 2006 in a bid to halt the slowing sales growth.

Rose said he expects trading conditions to "remain tough throughout 2008".

"We are well positioned with a strong product offer and better-than-ever values across our business.

"We now have 70% of our stores in the modernised format and a strong pipeline of new space for 2008 and beyond."

Rose said all UK business was facing "a real crunch" but insisted Marks & Spencer would "out-perform" the market during the next 12 months.

"The high street has definitely slowed up," he told the BBC Radio 4 'Today' programme.

"The market has slowed and we are concerned about the slowness of the market and we are saying 2008, and the start of 2009, is going to be tough out there."