Marks and Spencer reported its worst quarterly performance in two years today and warned that the pain for Britain's retailers could extend into 2009. The news sent its shares down 19% to close at 410p.
Britain's biggest clothing retailer said sales at its UK shops open more than a year fell 2.2% in the 13 weeks to December 29 after it slashed the price of clothes to lure shoppers spooked by the credit crunch. Analysts had expected its sales to be broadly flat.
Rivals also fell heavily on the gloomy outlook. British department stores group Debenhams shed 10% and fashion retailer Next 7%.
UK store owners are struggling as indebted shoppers cut back on spending following a series of interest rate rises, higher fuel bills and signs of a cooling housing market.
M&S CEO Stuart Rose, who has staged one of British retail's most notable turnarounds in his two years at Marks and Spencer, said the group had held onto market share by slashing prices by 6% across homeware and clothes.
Volume growth in general merchandise was 5%.
Rose said British businesses were facing a 'real crunch' as their costs, such as fuel bills, were rising, but weak consumer spending meant they were unable to raise prices.
He warned that tough trading could continue into 2009 and called for a rate cut, adding to pressure on the Bank of England. The central bank cut interest rates for the first time in two years last month and faces a tricky decision whether to cut again on tomorrow.
