Jeremy Warner: Downturn bites hard at Marks & Spencer

Sir Stuart Rose, chairman of Marks & Spencer, is no quitter, but he must occasionally wonder why he didn't quietly bow out earlier this year while he still had the chance. Instead, he not only incurred the wrath of shareholders by elevating himself to the executive chairmanship, but by doing so he has ensured he is still at the helm as the ship sails into the recessionary storm. Already the impact on sales and profits is brutal.

Sir Stuart could have retired on a high note, with the company once again in £1bn profit territory. Instead, he has hung around long enough for the City to start questioning anew whether he is actually any good. The big disappointment in the half-year figures was foods, where the company has been forced to reinvest a sizeable chunk of its margin in price promotions. Even so, this did not prevent a 5 per cent fall in like-for-like sales. M&S's unashamedly upmarket foods proposition is all very well in boom times, but when the going gets tough, it becomes exceptionally vulnerable to value-driven competition.

On clothing and general merchandise, M&S claims broadly to have held its market share, but again, what a contrast with discounters. Yesterday, Associated British Foods released figures which (embarrassingly for M&S) showed that its Primark subsidiary is still managing to grow sales and profits despite the downturn. This apparently continued even into October, a month which M&S described as "volatile".

Still, although things plainly look difficult for M&S, they can hardly be described as terminal. M&S has been on the high street for 127 years and, as Sir Stuart remarks, should be around for a few more yet. Costs, capital and market spend are being pared across the group, and debt remains well within manageable proportions.

How different this might have looked had Sir Philip Green succeeded with his highly leveraged bid a few years back. Human dynamo that he is, maybe Sir Philip would by now have paid back much of the money he planned to borrow to finance the takeover. If he hadn't, M&S might today already have become the first major retail casualty of the downturn. Enough "what if" history. For the time being, the dividend is held. Whether it will survive once others begin to cut theirs is anyone's guess.