Sir Stuart Rose reveals sales slump

But the company sold nearly 130 million items and had 56 million customers in the 10 days before Christmas.

The group sold 18 million mince pies and 400,000 turkeys, executive chairman Sir Stuart Rose claimed, and on its busiest day - December 23 - M&S's food business took a record £50 million.

But its high-profile promotional sales days - begun at the end of November to boost trading - ate into the group's margins, which will hit profits this year.

Analysts expect the company to report profits of around £620 million this year - more than a third lower than last year's £1 billion.

Sir Stuart denied that today's update amounted to a profit warning after the group's cost-saving measures were taken into account.

``If it was a profit warning we would have had to say something earlier,'' he said.

Sir Stuart said there would ``almost certainly'' not be any further store closures, although he said the group was taking the ``necessary action to keep ourselves lean and mean''.

The retail chief has endured a difficult year as high street sales have been squeezed and his own role as executive chairman - contrary to City best practice - caused controversy.

But he said: ``If this was an aeroplane flying through a storm the best thing to do is not to nip up the front and change the pilot.''

Shares in M&S rose 3% following the update.

Nick Bubb, retail analyst at Pali International, said: ''The third quarter like-for-like sales are bad... but not quite so bad as we expected, thanks to a late spending surge pre-Christmas.''

In his statement released this morning Sir Stuart Rose said: “Group sales were down 1.2%. Sales in the UK were down 3.4%. Our trading stance throughout the quarter enabled us to offer our customers great value, grow our volumes, maintain our leading market position and uphold our ethical stance. Our post Christmas sale which started on 27 December with 15% less stock into sale than last year has cleared quickly.

“We have made good progress on the key priorities set out at the interim results in November.

“We maintained our market share in Clothing with particularly good performances in Kids and Lingerie. Volumes were strong across all areas of Clothing. Home also performed well, growing sales by 1% with quality, great values and trust in the brand being important drivers. Online performed strongly in Q3 with record traffic driving sales up 29%; stock clearance was especially fast.

“Food showed an improved trend quarter on quarter, reflecting the initiatives put in place around better values, promotional stance, innovation, increased availability and reduced waste. This improvement accelerated as we entered the Christmas period, culminating in our biggest trading day ever on 23 December with record sales of over £50m.

Marks and Spencer Group PLC Registered Office: Waterside House 35 North Wharf Road London W2 1NW Registered No. 4256886 (England and Wales) “Our International store opening programme helped drive continued growth in sales, up 26.9%.

“UK retail gross margin for the full year is now expected to be around 175 basis points lower than last year as a result of increased promotional activity and our decision to invest in price for the benefit of our customers, especially in Food.

“We continued to control costs tightly and now expect operating cost growth for 2008/09 to be towards the lower end of our guidance of 4-5%. We have also made further progress on actions to reduce our underlying cost base in 2009/10 and are now expecting UK operating costs for 2009/10 to be between one and two percent below 2008/09, a reduction of £175m to £200m, after taking space growth and inflation into account.

This reduction in costs includes the benefit of a number of proposals that we are announcing today: • We have reviewed our store portfolio and, subject to consultation with staff, are proposing to close 27 stores. 25 of these are small under performing Simply Food stores and two are small main chain stores. Around 780 jobs may be lost as a result of these proposals.

• We are proposing to reduce the costs of our head offices, subject to consultation with staff, with the loss of up to 450 jobs, representing around 15% of our head offices headcount.

• We will be making changes to the Marks & Spencer Final Salary Pension scheme by capping employees’ annual increases in pensionable pay to 1%iv and changing the early retirement benefits for members who joined the scheme before 1996.

“We remain committed to maintaining our strong financial position. Capital expenditure for 2008/09 is expected to be no more than £700m and no more than £400m in 2009/10. We continue to target to be broadly cash neutral in 2008/09. We have no short term refinancing requirements.

“We are aware that the proposed changes set out above will be difficult for those members of staff impacted, but given that we expect challenging economic conditions to continue for at least the next 12 months we believe we are taking the right action to maintain the strength of our business.”