M&S shares suffer after sales blow

SHARES in Marks & Spencer tumbled in value today after the retail giant surprised the City with a profits warning.

SHARES in Marks & Spencer tumbled in value today after the retail giant surprised the City with a profits warning.

In a trading update issued a week earlier than expected, M&S said like-for-like sales in the UK had fallen by 5.3% during the 13 weeks to June 28.

M&S shares plunged by more than 20% in response to the announcement, which represents a sharply steeper rate of decline compared with the 1.7% like-for-like fall in sales reported by the group for the first three months of the year.

Two months ago, M&S posted annual profits of £1billion for 2007 and analysts had expected a figure of around £870million for this year, but they now see a figure of around £800million as more likely.

M&S also revealed yesterday that its director of food, Steven Esom, who joined the group from Waitrose little more than a year ago, was leaving with immediate effect following “significantly weaker” performance from the food business, with like-for-like sales down 4.5%.

General merchandise sales were down 6.2%, although M&S said it had retained its share of clothing sales amid the generally tough market conditions in the high street.

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Despite the wider downturn, however, M&S chief executive Sir Stuart Rose is still likely to come in for a hard time from shareholders at the company's annual general meeting next week, when today's update was originally expected.