M&S loses £1billion as credit crunch hits value of shares

By Clinton Manning, Business Editor 3/07/2008

Sir Stuart (Pic:PA)

Nearly £1billion was wiped off the value of Marks & Spencer yesterday as the credit crunch hammered trade.

In a further sign of the global slowdown, Starbucks announced it would close 600 US stores next year, hitting 12,000 workers.

M&S disclosed that sales at the giant's 600 High Street stores have fallen 5.3 per cent in the past three months - its worst performance for three years.

On a day in which all major retailers suffered on the Stock Market the news led to a huge 25 per cent fall in M&S's value.

Shares closed at £2.40, a seven-year low.

Retail analyst Phil Dorgan, of Panmure Gordon, said: "We feared the news on trading would be poor. We were wrong. It's absolutely dreadful."

City experts now believe Marks will make around £775million this year, down from £1billion last year and £100million less than previously expected.

Chairman Sir Stuart Rose admitted business would get tougher before it improved as family budgets were squeezed by higher petrol, fuel and food prices. While insisting Britain was not in a recession, he also warned the slowdown could last two years.

He said: "This is the fastest and most severe slowdown since the early 90s. Our customers are hurting.

"People's purses are being squeezed and they're taking tough decisions about what they'll have to give up. The harsh reality is that most of them will have to give up something and we're not immune to that."

Marks clothing sales were down. But Sir Stuart insisted this reflected falling sales across the fashion industry.

More worrying was a 4.5 per cent fall in food sales as shoppers traded down to cheaper rivals. Marks has been badly hit by a price war between leading supermarkets which has cut prices by up to 50 per cent.

Vowing he would not slug it out with Asda and Tesco on price, Sir Stuart said: "Price cuts generally mean putting quality second. We won't do that."

Asked if he felt the downturn threatened his own position, he said: "In a storm you want some seasoned pilots."

Marks sacked the head of its food business Steven Esom. Mr Esom, who joined M&S from Waitrose a year ago, will pocket a £500,000 golden goodbye.

Shares in housebuilder Taylor Wimpey more than halved in value after the firm said it had failed to secure extra funding and would cut 900 jobs.

The firm said UK housing reservations had slumped 45 per cent in the first half of the year. It is closing a third of its 39 regional offices.

Sportsdirect's shares fell by more than 13 per cent to 76p. Debenhams was down almost 12 per cent to 37.25p. Next fell almost 8 per cent to £8.37. Tesco (£3.44) and WH Smith (£3.50) also saw their values fall.