City awaits Marks & Spencer figures fearing more retail gloom

Marks & Spencer will be the focus of the City this week as it unveils its Christmas trading figures but many analysts are predicting the high street giant to add yet more gloom to the sector.

A majority of analysts forecast like-for-like sales growth to remain flat or dip for the first time in nine months, with some pencilling in a drop of as much as 2 per cent.

The weekend press was rife with speculation over the performance of M&S, which is seen as a bellwether of the high street, though opinions were varied on how the retailer will have fared. Retail experts had been predicting M&S to deliver like-for-like sales growth of up to 3 per cent but a number of banks cut their forecasts last week, including Morgan Stanley and Credit Suisse.

Some are more upbeat about M&S's prospects, seeing it as a safe haven amid the current high street turmoil. Goldman Sachs remains bullish on the stock and is tipping M&S as the biggest Christmas winner, thanks to its "defensive sales mix".

Undoubtedly, the newly knighted Stuart Rose, M&S's chief executive, will sound a note of caution when he delivers his update on Wednesday. Higher mortgage payments and household bills are eating into disposable incomes, while fears of an economic slowdown are also dampening consumer confidence. Tony Shiret, at Credit Suisse, which had been forecasting a 3-4 per cent increase in general merchandise, said "any weaker market conditions in October and especially November mean any positive like-for-like figure is likely to be small in general merchandise". Three-for-two Christmas offers and "70 per cent off" sales indicate the retailer has had to clear a significant amount of stock.

Sir Stuart offered some hope in November, when he said the group's revamped stores had seen an improved sales performance before the crucial Christmas trading period. The group had overhauled 70 per cent of its trading space by the end of last year and plans to increase this to 90 per cent by next Christmas. Sir Stuart is still hoping to be the first chief executive to take the group's full-year profits through the 1bn mark for the first time in more than a decade this year, with profits of 1.08bn currently forecast. In 1998, M&S became the first UK retailer to report profits of more than 1bn.

Nick Bubb, of Pali International, said: "The market expects the store revamp to drive growth but the vibe was that food and clothing were both disappointing before Christmas."

Retail stocks have been under pressure since Currys owner DSG International admitted profits would be up to 50m lower than market hopes, while Next said like-for-like sales from its high street outlets would shrink for the fourth year in a row during 2008. More than 4bn was wiped off the value of retail stocks last week.