M&S shares sink on black day for the high street

The UK retail sector had its very own black Wednesday yesterday, when a disastrous profit warning from Marks & Spencer sent shockwaves through the sector and the retailer's share prices plummeting.

All the foreboding about the depth of the meltdown in the retail sector was laid bare when the M&S chief executive Sir Stuart Rose unveiled tumbling like-for-like sales and signalled the good times were well and truly over. "We have had 10 years of boom time, everyone now has to swallow hard and cut their cloth according to their means," said Sir Stuart.

Shares in M&S tumbled by nearly 25 per cent to 240p – its lowest price since June 2001 – but it was far from alone. Its rivals also suffered, with Next down 8 per cent to 837.5p, and Debenhams down 11.8 per cent to 37.5p. But other retailers such as the supermarket chain Sainsbury's and the DIY group Kingfisher, which owns B&Q, also fell.

The problem for retailers is that there are no silver linings on the horizon or an end in sight to the credit crunch. Yesterday, the Organisation for Economic Cooperation and Development (OECD) turned the screws by forecasting that unemployment in the UK will rise by 100,000 over the next two years.

Not surprisingly consumers are starting to tighten their purse strings with great gusto, as the impact from soaring food, utility and petrol bills starts to bite. This week, a confirmation of falling house prices across the country from Nationwide only added to the darkening clouds hanging over UK Plc.

A further sign of the hardship facing retailers came as the kitchen equipment and retailer ProCook fell into administration, joining a 2008 list that includes the shoe chain Dolcis, the furniture retailer Ilva, the discount bookseller The Works and the fashion retailer MK One.

Other retailers are sure to follow, with several in the beleaguered furniture sector particularly vulnerable. If M&S is having problems, it is likely to be far worse for many other retailers.

Publicly listed retailers have posted the highest level of negative trading statements in three years during the second quarter of 2008, according to the accounting firm Grant Thornton. Its retail services team head David Bush said: "High street retailers are starting to feel the full impact of the credit crunch. There appears little likelihood of a significant turnaround in the short term."

Two days ago, Carpetright's chairman Lord Harris of Peckham said that next year could be one of the most difficult of the past 50 years.

The bad news for consumers is that the prices they pay in stores only look set to rise, as retailers are hit by soaring inflation in their operations and the strong euro against the pound.

Lord Harris said soaring oil prices and the buoyant euro had added 10 per to the cost of making carpets this year, while even Tesco – which continues to deliver strong growth – said this week it had raised the price of a kilogram of bananas by 10p as a result of inflationary pressures in its supply chain.

Amid the gloom, there are some retailers who are bucking the trend, but they are mostly those serving the well-heeled, such as Burberry, or those at the discount end of the market. Sales at the discount grocers Aldi and Lidl are booming, as middle-class shoppers ditch any previous delusions of grandeur and start hunting down bargain groceries.

But most retailers are feeling the pain of the shoppers coming through their doors, albeit at a declining rate.

As Sir Stuart said: "We have to trade the business hard and make sure we are fully equipped to deal with a longer than expected downturn." The consumer will also need to batten down the hatches because they could be in for a rough and lengthy ride.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
News
Professor David Nutt wants to change the way gravely ill patients are treated in Britain
people Why does a former Government tsar believe that mind-altering drugs have a place on prescription?
News
Norway’s ‘The Nordland Line – Minute by Minute, Season by Season’ continues the trend of slow TV
television The BBC have commissioned a series of programmes doing away with high-production values, commentary, script or drama
Arts and Entertainment
art
Sport
Jonny Evans has pleaded not guilty to an FA charge for spitting at Papiss Cisse
football
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Relations Officer

£13000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Jemma Gent: Project Coordinator

£12 - £15 Hourly Rate: Jemma Gent: In this role you will report to the Head of...

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable