Marks & Spencer warns of slower progress in fashion

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The Independent Online

Marks & Spencer took the gloss off strong full-year figures yesterday by signalling that the UK retail market was likely to grow by less than it had previously forecast.

Roger Holmes, the chief executive, warned that growth in the clothing market "would remain subdued for a period". He predicted expansion of 1 to 3 per cent, down from as much as 5 per cent. Mr Holmes said the retailer was moving into a different phase of its recovery. "Market share gains will be less rapid than last year," he said. M&S added 0.7 percentage points to its share of the clothing market, taking it to just over 11 per cent last year.

Mr Holmes' comments came as the group reported a 12 per cent rise in underlying pre-tax profits to £721m - at the top end of expectations. After exceptionals, pre-tax profits were 1 per cent lower at £679m. Turnover rose 6 per cent to £8.1bn.

The group sparked concern that its recovery was running out of steam last month when it said fourth-quarter clothing sales had fallen by 0.3 per cent after a 10 per cent rise in the third quarter. Mr Holmes declined to comment on current trading, but he said he hoped that some of the factors affecting the 3 per cent fall in sales at its London outlets - the closure of the Central Line, the advent of the congestion charge and fears of terrorist attacks - had improved.

John Baillie, an analyst at SG Securities, said: "They've had a very good year. It's now going to be harder work to make progress." M&S shares fell 6p to 300p, reflecting the tougher outlook, analysts said.

The group, which poached the former Selfridges' chief executive Vittorio Radice to head its home furnishings division earlier this year, said it would open its first dedicated homewear shop in the North-east next February. The store - Marks & Spencer Lifestore - would be organised into "lifestyle concepts" such as "relax, celebration, rest" rather than traditional departments, Mr Radice said.

M&S, which has improved its womenswear fashion ranges in an attempt to lure in occasional, younger shoppers, plans to launch a new menswear range this autumn called "Sp" - a colloquialism borrowed from the betting world. The collection, to be rolled out across 200 stores, would appeal to "dads who are still lads at heart", Mr Holmes said.

The company, which saw sales of children's' clothing fall 10 per cent last year, said it was still searching for someone to head up its childrenswear division. M&S said its pension deficit had tripled over the financial year to £1.2bn.