Pressure mounts on Sir Stuart as M&S forecasts slashed

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The Independent Online

Shares in Marks & Spencer fell for the seventh day in a row yesterday after one of its two joint brokers slashed full-year profits forecasts.

The Citi analyst Richard Edwards cut its pre-tax profit forecast for M&S by 17 per cent to £730m for the financial year to March 2009, and by 29 per cent to £570m for the following year. Citi has downgraded M&S to sell.

The downgrade capped a miserable week for M&S's executive chairman, Stuart Rose, who faces a stormy annual general meeting next week over the retailer's profit warning three days ago and the controversy concerning his dual role.

Mr Edwards said: "With growing input cost pressures across both the general merchandise and food businesses, the M&S profit and loss outlook still remains opaque and earnings forecast confidence low."

Citi forecasts that M&S's like-for-like clothing sales will be down 7 per cent and food sales will be 5 per cent lower this financial year.

M&S's share price fell by 9p to 227p. It has fallen every day of trading since 25 June.

PIRC, the corporate governance body, stepped up the pressure on Sir Stuart ahead of the AGM when it criticised the decision to award the food director Steve Esom, who was ousted this week, a £500,000 golden hello last year. PIRC said that half of Mr Esom's recruitment bonus is deferred into shares and held for three years. PIRC said: "It is not yet clear what proportion of the £500,000 payment Mr Esom will be entitled to retain, but the current situation at M&S serves to cast doubt over the effectiveness and appropriateness of such awards."

Mr Esom, who left the business last week, is expected to receive a pay-off of £550,000. An M&S spokesman said his recruitment bonus and pay-off were subject to discussions.

PIRC said that as it had not been able to bring a resolution on the dual role of chairman and chief executive at the AGM, it is recommending that shareholders oppose the election of Sir Stuart. However, Sir Stuart only needs a majority vote, and he is expected to be re-elected.

Shares in retailers were also hit by figures from John Lewis, which posted an 8.3 per cent fall in sales at its stores for the week to 28 June, which was its worst performance since April 2007, when its figures were skewed by Easter falling at a different time.

John Lewis's retail operations director, Patrick Lewis, said that fashion sales continue to grow, but sales of big ticket white goods and furniture are being hit by falling consumer confidence and the weak property market.

Sales at John Lewis at the Bluewater shopping centre in Kent fell by 24.6 per cent for the week.