Britain's premier retailer is set to tell shareholders at an annual meeting on Thursday that tough trading conditions and increased competition have caused a sharp year-on-year fall in sales in the first quarter of the new financial year. Yesterday, M&S announced that it was closing six stores in Germany and France at a cost this year of pounds 17m.
City analysts are bracing themselves for a bearish trading statement at the agm - the first shareholders' gathering since the departure of the former chairman and chief executive Sir Richard Greenbury. Many experts fear a double-digit plunge in like-for-like sales and some are raising the prospect of a surprise profits warning.
"The figures are going to be atrocious and I would not be surprised to see like-for-like sales down 11 per cent," said one analyst.
Experts believe the agm statement will show a decline in both clothes and food sales, which will be exacerbated by comparison with the strong growth achieved in the first quarter of the last fiscal year. "There is no doubt the numbers will be poor as they are up against the most demanding comparative period of the year," one expert said.
However, CSFB analyst Tony Shiret expects the retailer's gross profit margin to be under firmer control. He said a more conservative policy on stocks should mean less need to discount and a reduced dependence on clearance sales compared with last year.
M&S is also facing new challenges in food retailing - a sector in which M&S was thought to be less vulnerable.
"The big superstores are having an impact," said Investec Henderson Crosthwaite analyst Matthew McEachran. Tesco's range of quality ready-made meals, long an M&S product stronghold, has improved substantially and has much better price points. Further out, Mr McEachran sees additional challenges for the retailer.
"M&S don't have enough scale in the food business to compete," he said.
One analyst, who requested anonymity, urged M&S to be more open with performance figures. "It's going to be bad, so to see the shares near 400p is a bit premature; they're by no means in a recovery stage."
He added that a key meeting of M&S managers a fortnight ago had been kept under wraps. "They need to tell us what's going on," he said.
The difficult first quarter comes after the most turbulent six months in M&S history and will increase the pressure on the chief executive Peter Salsbury to speed up its restucturing programme.
Over the past few months, M&S announced 500 job cuts at its Baker Street head office and around 300 redundancies among its store managers. Industry sources believe further job losses are likely to be announced in the near future as Mr Salsbury completes his review of the business.
Analysts do not yet expect M&S to announce Sir Richard's successor as chairman. At present, the post is held by Brian Baldock, the former deputy chairman of Guinness, who, with headhunters Whitehead Mann, is leading the search for a permanent replacement.Reuse content