M&S warns of tough times ahead

Britain’s biggest clothing retailer, Marks and Spencer (M&S), has warned of difficult times ahead for the UK economy, and announced that the head of its food business, Steven Esom, is to step down after just one year of service.

Mr Esom joined M&S from Waitrose a year ago. John Dixon, currently director of home and M&S’ internet business, is to replace Mr Esom.

M&S’ food business, which is renowned for its ‘Simply Food‘ products, has been affected by a cut back of consumer spending.

Like-for-like UK sales (which exclude the impact of store openings and closures) fell 5.3% in the 13 weeks to 28 June. Like-for-like food sales were down 4.5%, while general merchandise sales fell 6.2%.

Following the news, shares in the retailer slumped by 24.5%.

Back in May, M&S expressed caution about consumer sentiment after it said it had experienced a ‘mixed‘ start to its 2008-099 financial year.

Figures from Experian’s footfall index show that visitor numbers dropped by 5.8% in June compared with June last year.

M&S is widely regarded as a key indicator of consumer sentiment. As a result of the gloomy outlook, shares in other retailers including Sainsbury’s and Next, also fell sharply.

According to Richard Hunter of Hargreaves Lansdowne Stockbrokers, food had previously been seen as something of a flagship product, whereas consumers are clearly beginning to downgrade their shopping habits.

Profits for the year to the end of March 2009 are expected to be well below the £1 billion recorded in the previous year.

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