M&S exchanges clothes chief after dismal Christmas sales

Retail Gloom: Matalan, Laura Ashley and sports chains all disappoint but Mothercare gets a festive lift
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The Independent Online

Marks & Spencer yesterday forced its clothing director to pay the price for its worst Christmas in years, sacking him as it unveiled a sharp fall in clothing sales and a surprise drop in growth at its food operations.

M&S topped yesterday's list of Christmas losers, which also included Matalan, John David Sports, Laura Ashley and JJB Sports, as the post-festive shake-up gathered pace. Mothercare was left as the lone voice of holiday joy, its 6.5 per cent underlying sales gain reflecting the success of its turnaround programme.

Analysts said David Norgrove, who has headed M&S's clothing arm for only 16 months, was the scapegoat for this latest setback to the group's faltering recovery. Mr Norgrove, 55, could receive a payoff of up to £330,000, potentially re-igniting the rewards-for-failure debate. The group said it would seek an outsider to fill his post; Belinda Earl, the former head of Debenhams, and New Look's Stephen Sunnucks are both thought to have been approached.

A poor Christmas cost Matalan its credibility as the discount retailer issued its second profit warning in as many months. John David, which trades as JD Sports, also said profits would miss market forecasts, despite reporting a 3.7 per cent rise in underlying sales for the eight weeks to 3 January.

M&S revealed that practically all areas of its business had come under intense pressure over Christmas, with women's clothing singled out as particularly bad. Food, comprising 40 per cent of the group's turnover, was also weak: like-for-like sales over the main Christmas period lagged even J Sainsbury's, rising just 0.5 per cent. Total clothing sales fell 3 per cent over the seven weeks to 10 January, while home and gifts fared worse, sliding 4 per cent to leave an overall like-for-like sales shortfall of 2.3 per cent.

Analysts said the poor Christmas would intensify pressure on Roger Holmes, M&S's chief executive, to step down. Mr Holmes said only that he, along with the rest of the team, "feel under pressure to perform".

He said M&S had badly misjudged its autumn/winter ranges of women's clothing, with "samey" knitwear and formalwear that had failed to grasp changing sartorial office trends. Some product ranges saw "steep double-digit sales declines" he admitted, leaving only its casualwear and Per Una label performing well.

Analysts said the defection of Justin King, M&S's former head of food, to J Sainsbury in November may have accounted for the slowdown in food sales. But this followed a poor summer for the group's food arm, suggesting the aggressive opening programme for its new Simply Food stores was cannibalising sales.

Meanwhile, Matalan shares plunged 8 per cent to 156.75p after the out-of-town retailer admitted it could barely give its stock away. The warning, which left the City questioning the viability of its trading format, prompted analysts to slash their full-year pre-tax profit forecasts by up to 40 per cent to as little as £60m. The retailer, which was forced into its first profit warning by a poor November, said like-for-like sales for the five weeks to 10 January fell by 5 per cent despite slashing the price of some items by 75 per cent.

"It is clear that the autumn/winter product has been absolutely appalling," Gillian Hilditch, at Arbuthnot Securities, said.

John King, who joined as chief executive last year, said fierce discounting from rivals had wiped out Matalan's usual 50 per cent pricing advantage. "Now it's a question of focusing on our key drivers, which are like-for-like sales and getting the value position back on track," Mr King said.

Separately, JJB Sports launched a £40m share buyback programme, using cash raised from the disposal of its TJ Hughes discount chain. Its shares leapt 30.5p to 268p as the market ignored a 3.5 per cent like-for-like sales shortfall.