Marks and Spencer’s interim profits fell by more than a third as both its food and clothing businesses suffered lower sales and margins.
Sir Stuart Rose, executive chairman of Britain’s biggest clothing retailer, said consumer confidence had “taken an inexorably downward trajectory” during the year.
Announcing interim profits that were 34 per cent lower than during the same period last year, at £297.8m, Sir Stuart said he would trim budgets in 2009 to cope with what he described as the toughest trading environment since the early 1990s.
The retailer, which earlier this year cut £500m from its £1.6bn capital expenditure budget for this year and next, will reduce its £150m marketing budget by a fifth next year, and is considering job cuts. Costs in the six-month period rose 5 per cent.
However, Sir Stuart said on Tuesday the cuts would not apply to the final dividend, insisting the pay-out to shareholders would be maintained, for this financial year at least.
M&S said margins would remain under pressure for the remainder of the year as it fought to stem falling market share in its struggling food business. It fell 0.2 percentage points to 4.1 per cent compared with last year, in spite of the retailer allocating a further 8.2 per cent of space to food.
Food margins fell 1.7 percentage points over the period as M&S cut prices on 530 basic lines – about a 10th of its total range – such as lemons and natural yogurt while also running its popular, but costly, “Dine in for £10” food promotion.
Sir Stuart said while the promotions were helping to bring people into M&S stores, they did not appear to be encouraging shoppers to spend more, with underlying food sales falling 5.3 per cent in the 26 weeks to September 27.
He urged the Bank of England to act decisivelyon interest rates to encourage reluctant consumers.
He said: “If the Bank of England reduces interest rates this Thursday . . . and, more importantly, if the banks themselves reduce the interbanking rate, then some of that will filter through . . . Maybe at the back end of 2009, we’ll see blue skies.”
Total sales in the UK fell 1.1 per cent, while underlying sales were 5.7 per cent lower in spite of M&S investing more than £1bn in the past financial year on improving the appearance of its stores. The shares rose 17p to 238½p.