Leading institutional investors in Marks & Spencer, the high-street chain store, are pushing the struggling retailer not to cut its dividend when it reports its full-year results in three weeks' time.
The investors say a cut would be unnecessary given the strength of M&S's balance sheet. They also point out that a decision to re-base the business may be viewed by the markets as an admission from the board that a quick recovery at M&S is unlikely.
The comments came as news emerged over the weekend that the wife of Philip Green, the retail entrepreneur who backed off from making a bid for M&S in February, has sold her entire holding in the company. The decision is likely to put further pressure on the shares this week.
Tina Green held 9.5 million shares in M&S, but she has sold out for about £25m. M&S confirmed the sale, but said that it had taken place "quite a few weeks ago".
Mrs Green was acting in concert with her husband, who was stalking M&S with a view to making an £8bn bid. Her decision would appear to indicate that Mr Green does not expect any other bidder to express an interest in M&S and that the shares have further to fall. They stood at 234p on Friday, compared to a 12-month high of 430p.
M&S is due to report its full-year results on 23 May. Although the figures will be poor - analysts are expecting a fall in profits from £546m to about £470m - leading institutions are urging the retailer's board to maintain the dividend.
One leading fund manager said: "They have an inefficient balance sheet, and they don't need to cut the dividend now. They could increase their level of gearing and then review the dividend pay-out on an annual basis. This would then give the management the chance to prove themselves."
M&S paid a full-year dividend of 14.4p per share last year. Some analysts are forecasting a cut to just 7p.
The comments came as Luc Vandevelde, M&S's new chairman, moved to quash speculation that he is planning to remove Peter Salsbury as the company's chief executive. "Any suggestion that I am looking for a replacement for Peter Salsbury is completely untrue," he said.
Meanwhile, City analysts warned that M&S's trading position would have been adversely affected by the recent spell of wet and cold weather. They are expecting Mr Vandevelde to give a detailed strategy announcement outlining his plans for M&S's food business and its international operations, and to address over-capacity in the UK market.
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