Rose: no growth for retail in 2010

M&S posts first underlying sales rise for two years, but figures trail those of rivals

Sir Stuart Rose has said that the UK retail market will not grow this year, as uncertainty over how the next government will tackle the public deficit hangs over consumer spending.

The chairman of Marks & Spencer made his comments as the high street bellwether delivered its first increase in UK underlying sales for more than two years yesterday, though the figures were marginally below City expectations and behind those posted by fashion rival Next and the department store John Lewis.

Sir Stuart said he was unable to shed any more light on when the incoming chief executive Marc Bolland, who holds the same role at Morrisons, will be released by the grocer, but said it would be "towards late spring".

For the 13 weeks to 26 December, M&S posted UK like-for-like sales – which strip out the impact of new space – up by 0.8 per cent, compared to a slump of 7.1 per cent for the same period a year ago. Sir Stuart added that if the period had included the first day of its Christmas sale on 27 December, its underlying sales would have been a full percentage point higher. However, the City was disappointed by the update and M&S shares were the biggest fallers in the FTSE 100 yesterday.

Sir Stuart said there was a "phoney war" going on between the main political parties over policies to tackle the public deficit of £178bn ahead of the general election.

"We all know that we have got some medicine coming but we don't know what the doctor is going to give us," Sir Stuart said. "Whether it is government A or B, either one has said they cannot balance the books. This will have an effect on consumer expenditure, which means the total retail market will not grow [this year]."

Group sales at M&S grew by 2.6 per cent. Its international division posted modest growth of 6 per cent over the 13 weeks, hit by the dire market in Ireland and Greece.

Credit Suisse described M&S's trading figures as "disappointing" compared to the performance from Next. Its fashion rival delivered underlying sales up by 3.2 per cent for the 22 weeks to 24 December, which also did not include sales recorded on the first day of its clearance sale.

Streaking ahead of both retailers is the department store John Lewis, which has unveiled like-for-like sales up 12.7 per cent for the five weeks to 2 January. M&S's food division grew underlying sales by 0.4 per cent over the 13 weeks to 26 December, although it was up against dire figures last year when sales tanked by 5.2 per cent.

According to Nielsen, Waitrose grew its sales by 13.6 per cent, compared to 3.7 per cent at M&S, for the 12 weeks to 26 December. However, Sir Stuart said he was not "overly-exercised" by Waitrose. "We have got the food business on the front foot," he said. "We are confident that we can keep that going and John Dixon [the executive director of food] and his team have done a good job."

He said that M&S's food arm had delivered its biggest ever fortnight and a record £50m of sales on 23 December. But Tony Shiret, an analyst at Credit Suisse, said: "What is really an issue in food is that there does not seem to be a long-term sense from which they will start to move it forward again."

The retailer's general merchandise division, dominated by clothing, delivered like-for-like sales up by 1.2 per cent. While M&S has been helped by the recent cold spell, it had to close 56 stores on Tuesday because of the arctic conditions. But since the beginning of December, the retailer's sales of thermals are up 29 per cent and it sold three cashmere jumpers every minute in the last two weeks before Christmas. Overall, Sir Stuart said: "Kidswear was the best performer."

Morrisons declined to comment last night on when it would allow Mr Bolland to join M&S. Sir Stuart said: "I don't know any more than you do, it is a matter between Marc and Morrisons... I am not expecting him to join in the next two months."

Sir Stuart will serve as chairman for a period after Mr Bolland joins, but has said he will step down completely before July 2011 at the latest.