Shock as Christmas sales slump hits M&S

Chief executive Stuart Rose shocked the City with figures showing that sales fell 2.2 per cent compared with the same period last year.

Food sales dropped 1.5 per cent and non-food sales, which are mainly clothing, were 3.2 per cent lower.

It is a major blow for Mr Rose's reputation as one of retail's most skilful bosses and the first time that M&S has suffered a quarterly sales fall for more than two years.

Some City analysts had been expecting M&S sales to have grown slightly over Christmas and today's dire trading numbers will underline how weak consumer confidence has become.

However, they contrast unflatteringly with the 4.1 per cent growth reported by Waitrose yesterday. The Christmas setback will also cast doubt over M&S's ability to make £1 billion profit this year for the first time in a decade.

The one item of brighter news was that M&S confirmed it was one of the few high street names not to be panicked into cutting prices before Christmas. Mr Rose said: "We expect trading conditions to remain tough throughout 2008."

M&S also revealed a significant move to stock more basic cooking ingredients such as herbs, spices, rices and pulses, and fewer ready meals. It follows a big growth in home cooking over recent years, particularly in London, and a move away from the frozen pizza culture.

Steve Esom, head of food at M&S said: "From now on customers looking to cook from scratch and wanting to buy all their ingredients will increasingly find everything they want under one roof."

The M&S bombshell follows poor Christmas trading figures from major names including Next, DSG International, owner of the PC World and Currys chains, and Land of Leather.

One of the few retailers to buck the trend was department store chain John Lewis where sales grew 6.2 per cent. Among the department stores to have hugely outperformed other retailers were Selfridges and House of Fraser. Supermarkets are also thought to have done well. Sainsbury's will update the City on its performance tomorrow.

Stores noticed that consumer spending started to tail away in November and was very patchy over Christmas. Confidence has been hit by interest rises and concerns about the future of the economy after the global credit crunch.

Retailers will be hoping for some relief from the Bank of England tomorrow when it meets to set interest rates.

Many City analysts believe it will shave a further 0.25 per cent off the base rate.