Spending fears hit M&S as shares tumble

Chairman Sir Stuart Rose said he doubted there would be any growth in British retail sales this year and the climate is likely to "get tougher".

"We know that we have got some medicine coming," he said. "You'd be a fool if you didn't think it was going to get harder."

There were also concerns that incoming chief executive Marc Bolland, who was poached from Bradford-based Morrisons, won't start his new role until May. Investors were hoping he would be in the saddle early in the new year.

Sir Stuart said: "I have no further news on Marc Bolland. We don't have a release date from Morrisons. It's a matter between Marc and Morrisons." He later added that he expects Mr Bolland to start in "late Spring".

Taxes are expected to go up this year in order to cut Government debt while unemployment is also expected to rise sharply. Both factors are likely to hit consumer confidence over the year as consumers tighten their belts after the festive period.

"There is the prospect, whoever is in power in the mid-part of this year, of some really stringent measures coming in to bring down the deficit," said Sir Stuart.

Like-for-like sales at UK stores rose by 0.8 per cent in the 13 weeks to December 26, below forecasts of a 1.2 per cent increase and underperforming John Lewis and Next.

M&S said underlying UK sales rose 1.8 per cent after adjusting for the fact that last year's figures included an extra day of the post-Christmas clearance sale.

Despite the impact of the traditional Boxing Day closure on M&S's trading figures, Sir Stuart said the firm had no plans to open on Boxing Day next year.

M&S was trading against far easier comparisons than in 2008, when it reported a 7.1 per cent fall in like-for-like sales at the height of the recession – its worst performance since 1999.

But the 0.8 per cent increase continues the run of improving sales.

General merchandise sales rose 1.2 per cent. M&S refused to cut prices in the run-up to Christmas in contrast with last year's two one-day specials to attract shoppers.

Clothing sales rose by a more impressive four per cent. A pink duffle coat worn by model Twiggy in the retailer's pre-Christmas advertisements sold out within three weeks.

Food sales were ahead by just 0.4 per cent after shoppers switched to rivals such as Waitrose and Sainsbury's.

Sir Stuart admitted that M&S had been "bested" by John Lewis's Waitrose grocery chain which reported a 16.1 per cent rise in total sales for the 13 weeks to December 31.

"Waitrose have done a good job," he said. "It's been a tough war out there in foods and I take my hat off to them."

Analyst Kate Calvert at Shore Capital described the results as "underwhelming". "I would say M&S had a respectable Christmas, but not necessarily a sparkling Christmas," she said.

M&S said strong sales of seasonal treats like mince pies and champagne were offset by sluggish demand for furniture and by disruption caused by bad weather.

M&S shares closed the day down 27.5p at 377.4p.

The shares, which plunged over 60 per cent in 2008 as the recession took hold, recovered over half that loss last year as it stepped up promotions in the food business and introduced new clothes.

M&S attracts around 21 million customers a week from more than 650 stores and also has about 300 shops abroad.

Suffering in midst of the cold snap

M&S said heavy snowfalls over the past two weeks have cost it "millions of pounds" in lost sales.

Chairman Sir Stuart Rose said that if the cold snap continues "there will be much less money going into the tills".

The UK is in the middle of its longest cold snap since 1981.

The heavy snow forced M&S to shut 58 stores on Tuesday and, with severe weather warnings in place for most of the country over the next week, more closures could follow.

In addition to shoppers not being able to get to stores, deliveries have also suffered.

On the plus side, Sir Stuart said the group has seen bumper sales of leggings, boots and coats and M&S is selling several pairs of gloves every second.

The bad weather has also boosted sales of thermal underwear, gloves, hats and snow boots.

Meanwhile Leeds-based Asda has seen a 1,000 per cent rise in sales of thermal underwear.

Tesco said soup sales are up 80 per cent on two weeks ago and ready-meal sales have risen by 40 per cent.