Clothing boss out as M&S slides

HIGH STREET stores group Marks & Spencer today revealed the full extent of its disastrous Christmas when it admitted that sales of its women's clothing ranges had gone into freefall.

The head of the company's clothing operations, David Norgrove, who was paid £600,000 in salary and bonuses, has resigned and tens of thousands of staff have been warned that their bonuses will be cut by up to two thirds from last year's levels.

In a Christmas trading statement that matched the worst fears of the City, M&S said clothing and footwear were down 3% over the seven weeks to 10 January compared with the same period last year.

The worst affected area was women's wear, which is thought to be down as much as 10%, although this figure is not disclosed separately. Sales of children's wear, which includes David Beckham's DB07 range, were also lower.

Chief executive Roger Holmes, who will now face intense pressure from investors to turn the company round, admitted the figures were 'disappointing'.

He said: 'The fall in clothing sales was driven by a weak performance in certain key women's wear areas, notably knitwear, coats and suits, where our ranges were not strong enough and the warm weather had significant impact.'

The Per Una fashion range and casual wear performed more strongly. He said M&S had faced intense competition from stronger rivals such as Next.

Holmes also announced that Norgrove, 55, is stepping down and a replacement is being sought. Norgrove, former private secretary to Prime Minister Margaret Thatcher in the late Eighties, is likely to receive receive a year's salary - £330,000 - as compensation. Among those tipped for the job is former Debenhams head Belinda Earl.

Total M&S sales over Christmas were down only 0.1%, thanks to 5% growth in food sales.

Holmes said: 'It's been a tough season but other people such as Next have delivered better performances. That's the benchmark we set ourselves.' He denied that he felt under pressure but said: 'Personally, I am dissatisfied with the performance.'

The company has been struggling since the late summer when its autumn and winter ranges got off to a slow start because of the warm weather.

M&S was also caught out by the early start to the winter sales in mid-December. It decided to hold on until after Christmas, while High Street competitors were already slashing prices.

The bonus pool is being cut from £34m to £10m, with the biggest losers likely to be senior management. Board members are not expected to receive bonuses. Holmes said food sales had been 'adequate'. Holmes, who got a bonus of almost £500,000 last year, does not expect a payout himself this year.

The grim tidings came on a generally downbeat day for the retail sector and will fuel investor fears the consumer boom that has helped the economy avoid recession for the past two years is faltering.

M&S shares jumped 3p to 277 1/4p despite the poor figures, which had been widely expected. The City also took heart from a downward revision of cost increases this year, which have been cut from 3% to 1.5%.

Commentary by Chris Blackhurst

THE figures from M&S and Dixons confirm a yawning chasm is emerging between those chains which seem able to power ahead regardless and those that battle just to stay still, or worse, fall away.

The leaders are headed by Tesco, Mothercare and Next. But the laggards are also dominated by some of the High Street's long-established names. They include M&S, Sainsbury's and WH Smith. No great shakes are expected tomorrow from Woolworths either.

The strugglers seem slow, reactive not proactive, unappealing to the nascent youth market, unable to compete on price with other groups and dotcoms, not providing the same range or exclusivity as specialists.

They appear, increasingly, to belong to a different, calmer age. The High Street is changing rapidly - whether some of our most famous stores have any hope of a prosperous future in it, must be in doubt.