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M&S hit by poor Christmas sales M&S hit by poor Christmas sales
(about 3 hours later)
Retailing giant Marks and Spencer has reported a fall in sales over the key Christmas trading period, adding to signs of slower UK consumer spending.Retailing giant Marks and Spencer has reported a fall in sales over the key Christmas trading period, adding to signs of slower UK consumer spending.
UK like-for-like sales fell 2.2% in the last three months of 2007, M&S said. Sales of clothes and homeware declined 3.2%, while food sales dropped 1.5%. UK like-for-like sales fell 2.2% in the last three months of 2007, its worst performance for more than two years.
It was the firm's worst performance for more than two years sending M&S shares down 19% to 401 pence on the news. Sales of clothes and homeware declined 3.2%, while food sales dropped 1.5%.
M&S said trading conditions would remain tough in 2008. M&S said trading conditions would remain tough in 2008. The news pushed the retailer's shares down 18% to 413p in early afternoon trade.
"We are concerned that this soft performance has been delivered despite huge cash investment in the stores, a considerable advertising campaign and strong trading momentum over the last two years," said Andrew Wade, an analyst at Seymour Wade.
The fall in the value of M&S stock means it is approaching the 400p-per-share offer which retail tycoon Philip Green said he would pay for the firm in mid-2004.
The BBC's Robert Peston said this was "potentially pretty embarrassing" for Sir Stuart and the M&S board, given how much they had spent on modernising the stores and advertising.
Discounting
Other retailers were also hit over Christmas as consumers pulled back their spending.
The High Street boom is over Robert Peston, BBC business editor Read Robert Peston's blogSee M&S share priceThe High Street boom is over Robert Peston, BBC business editor Read Robert Peston's blogSee M&S share price
Earlier in the day M&S shares had hovered around 401p - approaching the 400p-per-share level which retail billionaire Philip Green said he would pay for the firm in mid-2004.
BBC business editor Robert Peston said this was "potentially pretty embarrassing" for Sir Stuart and the M&S board, given they had rebuffed his approach and how much they had subsequently spent on modernising the stores and advertising.
Discounting
Other retailers have also suffered weak Christmas sales, indicating that consumers are cutting back their spending.
On Monday, the British Retail Consortium said UK retailers had seen the slowest sales growth in December for three years, with sales up by just 0.3% year-on-year.On Monday, the British Retail Consortium said UK retailers had seen the slowest sales growth in December for three years, with sales up by just 0.3% year-on-year.
Talking to the BBC, M&S chief executive Sir Stuart Rose said the UK High Street "has definitely slowed up" and conditions in the clothing market were tougher than they had been for 10 years. M&S chief executive Sir Stuart Rose told the BBC that the UK High Street had "definitely slowed up" and conditions in the clothing market were tougher than they had been for 10 years.
But he said that unlike other shops, M&S had not discounted heavily to shift its stock. When a flagship general retailer has a dreadful performance...then it does not auger well for other general retailers Stephen Pope, Cantor Fitzgerald class="" href="/1/hi/business/7178459.stm">Analysts' reactions class="" href="/1/hi/programmes/working_lunch/7176597.stm">Other retailers to suffer
"We did not discount in the run-up to Christmas," Sir Stuart said, adding that stock levels were well controlled and the company had seen a strong start to the Christmas Sale. Prices on clothing and home products were down 6% against a year ago, although Sir Stuart said that M&S had not cut its prices in the run-up to Christmas.
Marks hasn't yet resorted to the kind of savage price-discounting we are seeing from its rivals. So it has ammunition in reserve Robert Peston, BBC business editor class="" href="/1/hi/business/7178459.stm">Analysts' reactions class="" href="/1/hi/programmes/working_lunch/7176597.stm">Other retailers to suffer He added that stock levels were well controlled and the company had seen a "strong" start to the Christmas sale.
Website sales were particularly strong, adding 78% during the quarter. And in contrast to its poor results at home, M&S's international sales rose 15.1%. Website sales were particularly healthy, up 78%, and, in contrast to its poor results at home, M&S's international sales rose 15.1%.
At the same time, certain sectors like food had improved their outlook. Looking ahead, the firm said its plan to update its stores had been applied to 70% of its shops, adding that a "strong pipeline of new space for 2008 and beyond" was planned.
Pipeline Reserves
The BBC's Robert Peston said despite the latest results there were still reasons for hope. The disappointing news from M&S had a knock-on effect on other retailers, with shares in companies such as Next, Debenhams and Argos-owner Home Retail Group all trading lower.
"When a flagship general retailer has a dreadful performance in the third quarter then it does not auger well for other general retailers," said Stephen Pope from Cantor Fitzgerald.
However, Robert Peston said there were still reasons for hope at M&S despite latest results.
"Marks hasn't yet resorted to the kind of savage price-discounting we are seeing from its rivals. So it has ammunition in reserve"."Marks hasn't yet resorted to the kind of savage price-discounting we are seeing from its rivals. So it has ammunition in reserve".
He added that it has the "best property portfolio on the high street" making it more resilient than most for a deteriorating economic climate. He added that it has the "best property portfolio on the High Street" making it more resilient than most for a deteriorating economic climate.
Looking ahead, the firm said its plan to update its stores had been applied to 70% of its shops adding that a "strong pipeline of new space for 2008 and beyond" was planned.