M&S profits slump further

Marks & Spencer today suffered a fresh blow when it revealed that food sales have been falling.

In its latest trading statement to the City, it said that in the two weeks up to 2 October "sales in food were slightly lower".

The slide will be seen in the City as confirmation of its worst fears that the new management team has failed to halt the decline of the high street giant as it continues to lose food sales to supermarket rivals such as Tesco and Asda.

M&S warned today that it expected its profits to fall from ?325 million to between ?285 million and ?295 million over the first half.

Its latest trading update to the City showed that clothing sales have remained steady during the past fortnight, but are still down by 7.7 per cent.

But there was also a further fall on the food side, which extended its decline from 2 per cent to 2.6 per cent.

As well as the fall in profit, the group will also have to pay out ?80 million to cover the cost of defending a number of exceptional items, including its defence against the ?9.1 billion bid from Bhs billionaire Philip Green earlier this year together with the closure of its failed Lifestore and the move from Baker Street to a new head office at Paddington Basin.

There had been some hopes that M&S might have clawed back some sales in response to its new autumn ranges, but today's figures show recovery at the group will be a long haul. Chief executive Stuart Rose has already warned the City that the real benefits of the new ranges and improved store layouts will not be seen until next spring.

Homewares remained the worst performer, with a decline of more than 20 per cent. M&S continues to lose sales to competitors such as Next and Asda's highly successful George clothing range.

A new report yesterday revealed that M&S had been relegated into fourth place in the ?4.3 billion a year childrenswear market, behind Next, Asda and Tesco.

Five years ago it held top position, but the research firm Verdict says the likelihood of it ever recapturing the lead is "remote".

Tomorrow Monaco-based Mr Green, who launched a ?9.1 billion bid for the group in the summer, will release figures for his Bhs chain.

These are likely to be in sharp contrast with the performance at M&S, with news of further increases in sales and profits.

Since bowing out of the M&S bid, Mr Green has vowed to step up the pressure on the chain, taking his fight to the high street and launching an advertising blitz for both Bhs and Arcadia: the Topshop, Miss Selfridge, Burton and Dorothy Perkins business.