M&S says half-year profits will fall further 12 per cent

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The Independent Online

Marks & Spencer underscored the extent of the challenges facing its chief executive yesterday, when it revealed its fourth successive quarter of falling sales and said it would take an £80m hit on profits.

Marks & Spencer underscored the extent of the challenges facing its chief executive yesterday, when it revealed its fourth successive quarter of falling sales and said it would take an £80m hit on profits.

The struggling retailer also confirmed that its interim pre-tax profits to 2 October would be up to 12 per cent down on last year, at between £285m and £295m.

M&S is estimated to have spent £40m defending itself from Philip Green's £9bn takeover attempts, forming the bulk of £80m of exceptional charges that it plans to take in its first half.

Although M&S's trading update came just two weeks after Stuart Rose announced a sharp fall in sales, alongside the group's launch of its £2.3bn tender offer, the pace of deterioration of its food business has unnerved analysts.

M&S said like-for-like food sales were 2.6 per cent lower in the 12 weeks to 2 October, after falling 2 per during the first 10 weeks. Its home business also declined, accelerating the fall in underlying group sales to 5.5 per cent, from 5.2 per cent during the first 10 weeks. The group described its 7.7 per cent underlying clothing sales shortfall as "steady", with analysts attributing the marginal pickup during the past fortnight to more autumnal weather.

Katherine Wynne, at Merrill Lynch, wrote: "Food is the focus of concern with the trend slipping quite sharply over the past two weeks." She trimmed her full-year forecasts by £10m to £725m, arguing the need to "take a more cautious view on H2 food sales".

Tony Shiret, at Credit Suisse First Boston, said the food figures showed no sign of benefiting from the turmoil at J Sainsbury and Wm Morrison, adding: "This, in our view, is a critical time for M&S's food business to get it right."

M&S said the rest of its exceptional charges would cover the cost of retreating from Lifestore, its failed attempt at taking on the contemporary home furnishings market, moving its head office from Baker Street to Paddington and axing 1,000 head office jobs.

Separately, M&S revealed it had received regulatory clearance to sell its financial services division to HSBC. It needs the proceeds to help fund its £2.3bn tender offer, which closes on 22 October. Shares in M&S rose 4.5p to 347.5p.

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