M&S sales slide 6 per cent as shoppers pull in belts

Marks & Spencer deepened the gloom on the high street today when it revealed a 6.1 per cent slide in sales.

The food and clothing giant, seen as particularly vulnerable to the downturn in consumer confidence, said shoppers "are increasingly cautious about their budgets".

The grim third-quarter trading update will add to fears that the high street is heading for its worst Christmas since the early Eighties recession.

M&S has been criticised by City analysts for being slow to respond to the credit crunch and "lacking innovation".

Its premium-priced food has been blamed for driving budget-conscious customers away to Tesco and Sainsbury's. Some former M&S customers are even shopping at discounters such as Aldi and Lidl as well as Iceland and the Co-op, according to industry research. At the same time M&S has lost its market share in clothing to rivals such as Next and discounters such as Primark.

The statement revealed that like-for-like food sales fell 5.9 per cent while its non-food goods, mainly clothing, were down by 6.4 per cent.

M&S chairman Sir Stuart Rose said: "Consumer confidence remains fragile and the retail environment unpredictable. Consumers are increasingly cautious about their budgets. We have responded by offering customers better values and more promotions across the business, while at the same time tightly controlling our costs."

Sir Stuart said that the chain was responding by offering "keen value" to consumers - a move that will cut its profit margin. One of its biggest intitiatives to win back customers is its £10 meal-for-two deal, which offers customers two main courses, vegetables, deserts and a bottle of wine.

M&S is also hoping for a positive response to its "great quality, stylish" autumn and winter range, which is modelled in a fun fairthemed TV advertisement starring Twiggy, Lily Cole and Myleene Klass.

Although today's figures were slightly better than the City expected, analysts remain doubtful that M&S can be turned around quickly after a disastrous year.

The weak trading will be contrasted with a strong performance from Tesco, where like-for-like sales were up four per cent and profits by 10 per cent.

John Stevenson, a retail analyst for Shore Capital, said the M&S figures reflected a downturn which is likely to last throughout next year. Its profits are expected to fall from £1 billion to around £700 million this year.

He said: "Consumer confidence has taken a sharp downturn, and there are some tough times ahead for retailers like M&S. In recent years people have left it late to do their Christmas shopping. This year there will be very real concerns as to whether people intend to spend at all."

Market research firm Taylor Nelson Sofres said that in August M&S had an 11.4 per cent share of the womenswear market, compared with 13.7 per cent earlier in the year. Its total market share across all departments was down from 11.7 per cent in March to 9.8 per cent in August.

Mr Stevenson added: "M&S seems to be lacking innovation, particularly in the food department. There aren't the offers there to get people coming in the doors."

Nick Bubb, a retail analyst with Pali International, said: "M&S does seem to be underperforming. Companies like Zara and H&M have been doing pretty well, so Sir Stuart will be asked why. He will also have to explain why food sales are down so much when he promised three months ago that he would personally turn around the food division."

HOW RIVALS ARE TEMPTING SHOPPERS

TESCO

Has introduced and heavily promoted its Market Value and Discounter ranges in a direct riposte to the new, aggressive competition from Lidl and Aldi. There are about 350 lines covering most of the items in a basic shop such as tea bags, pasta and shampoo.

SAINSBURY'S

Huge increase in the number and range of its special offers, led by its Feed Your Family For A Fiver initiative. Has also launched a website for customers highlighting different ways they can cut their everyday bills.

WAITROSE

Has cut prices and revived long-neglected cheaper cuts of meat such as cheeks and trotters to help cut household bills.

MORRISONS

Has more than 1,000 special offers every week, including Buy One Get One Free offers, "multi-save" deals and Better Than Half Price promotions.

ASDA

Has slashed the price of 5,000 lines, including every product in its value Smart Price range. Has introduced a range of 50p basic foods including a loaf of bread, butter and half a dozen eggs.

ALDI & LIDL

Both use buying power, no-frills stores and a limited range to drive down prices. Claim to be able to slash up to 25 per cent off the typical British household weekly food bill.