Sector movers: M&S management try damage limitation

09.01.2008

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Although the market was braced for a disappointing trading update from flagship retailer Marks & Spencer the figures proved worse than expected, and the shares dived more than 20% to below 400p before recovering slightly.

Marks and Spencer reported a 2.2% fall in UK like for like sales during the third quarter as market conditions became more challenging through November and December.

It said like for like sales of General Merchandise for the 13 weeks to 29 December dropped 3.2%, while food registered a 1.5% decline. Analysts had expected growth of more than 1%.

Group sales, however, were 2.8% higher, with UK sales 2% better and international sales 15.1% higher.

The effects of Marks & Spencer's announcement were felt throughout the retail sector, with Debenhams and Next among the major casualties.

Investors were particularly alarmed by the gloomy outlook for this year and next.

M&S's newly knighted CEO, Sir Stuart Rose, said on the BBC Radio 4 "Today" programme that "we think that 2008, and possibly into the first part of 2009, is going to be tough out there."

The company's finance director, Ian Dyson, tried to put a positive spin on the results saying: "We have had nine quarters of like-for-like growth; this is one quarter of decline."

Dyson claimed the business was "in as good a shape as it has ever been."

With market sentiment badly affected by Marks & Sparks's stumble it was left to defensive stocks to provide the bright spots. Pharmaceuticals are up for the third day in succession, with AstraZeneca leading the charge, while tobacco stocks and utilities also garner support.