Retailing: M&S will accept credit cards in bid to boost sales

Chain bows to customer pressure after profits fall

MARKS & SPENCER is to accept credit-card payments in its stores from April as part of a package of measures to revive flagging sales and halt a drastic decline in profits.

Other efforts include plans to cut the share of goods sourced from British suppliers from half to one-third of the total, and the sale of some property assets to raise pounds 400m.

M&S plans to work closely with leading designers such as Betty Jackson on exclusive clothing ranges. It is also considering selling more branded goods in specific sectors after the success of its link with Orange mobile phones.

The chain is now the only main British retailer that does not accept Visa and Mastercard payments. Two months ago John Lewis bowed to demand for credit-card payment.

M&S has been reluctant to accept credit cards because it was worried about damaging its own chargecard operation. This has been one of the most successful parts of its business as high street competition in clothing has increased.

The decision means M&S will accept third-party credit payments for the first time since Barclays launched Britain's first credit card in 1966. Peter Salsbury, M&S chief executive, said: "The retail environment is fast-moving, and we must look to provide customers with the most convenient, flexible and reliable ways of shopping."

Retail experts said M&S was no longer powerful enough to resist consumer preferences. "Being able not to accept credit cards flowed from its position of strength, but it doesn't occupy that position any more," said Richard Hyman of Verdict. "It has lost business and can't afford to lose any more."

Yesterday M&S unveiled yet another sharp fall in profits, which for the six months to September fell to pounds 192m, compared with pounds 337m the previous year. UK profits fell from pounds 261m to pounds 145m, European operations lost pounds 25m, and the US Brooks Brothers clothing stores lost pounds 5m after the costs associated with an expansion plan.

The group warned in September that profits would fall sharply. Yesterday it revealed that trading remained difficult in October despite promotions. Sales in clothing and home furnishings were down by 0.4 per cent on the previous year, excluding new stores. The company admitted the figures had been boosted by last week's promotion, giving pounds 5 vouchers for each pounds 25 spent.