Marks & Spencer Group Plc, the United Kingdom's biggest clothing retailer, fell the most in at least 19 years in London trading after an unexpected decline in holiday sales.

The shares slid as much as 21 percent after Marks said yesterday that revenue fell 2.2 percent at stores open at least a year in the fiscal third quarter ended December 29, the first same-store sales drop in two-and-a-half years. The median estimate of eight analysts surveyed by Bloomberg was for growth of 1.1 percent.

Chief Executive Officer Stuart Rose, who was knighted last month after reviving sales during three years leading the company, said conditions for the London-based retailer will "remain tough" through 2008. Britons have cut back on purchases as higher mortgage payments, taxes, utility bills and food prices weighed on income.

"To see them decline to such an extent has really surprised the market," said Bryan Roberts, global retail research manager at Planet Retail in London. "Expectations were very high. They've been in full recovery mode for the last 12 to 18 months."

The retailer's shares tumbled as much as 105.5 pence to 398 pence in London, the first time it fell below 400 pence since October 2005. The stock traded at 416.75 pence as of 10:57 am in London. It dropped 22 percent in 2007 after more than doubling in the two years through 2006. Credit-default swaps on Marks & Spencer rose to the highest in two years.

Shares of Next Plc, the third-largest UK clothing seller, declined as much as 8.5 percent, while department store operator Debenhams Plc fell as much as 13 percent. The 20-member FTSE 350 General Retailers Index lost 8 percent of its value, the biggest one-day drop since October 20, 1987.

"The figures are very disappointing," said analyst Freddie George at Evolution Securities in London, who cut the shares to "reduce" from "add". Evolution provisionally lowered its pretax profit estimate for this fiscal year to 1 billion pounds from 1.045 billion pounds.

Stockbroker Seymour Pierce reduced its rating to "hold" from "outperform".

Same-store sales of clothing and homewares fell 3.2 percent in the third quarter, while food revenue dropped 1.5 percent on that basis, Marks & Spencer said. Total sales rose 2.8 percent after Marks & Spencer opened new stores, expanding its chain of Simply Food outlets.

Average general merchandise selling prices fell at least 6 percent, Rose, who won a British knighthood in December, told journalists on a conference call. UK same-store sales rose 0.3 percent last month, the slowest pace since March 2006, the British Retail Consortium said on Tuesday.

'Very tough time'

"If you are an average person on an average salary in the UK, you are having a very tough time," Rose said in an interview on Sky television, calling for the Bank of England to keep reducing interest rates. "About the only thing that isn't going up is the cost of clothing. People are being squeezed."

The retailer didn't discount in the run-up to Christmas and had a "strong start" to its sale period, Rose said in the statement. Sale stock has now cleared.

Rose, who thwarted a takeover plan by billionaire Bhs Group Ltd. owner Philip Green in 2004, revived the company by redesigning women's wear and increasing advertising with campaigns featuring model Twiggy and pop group Take That. The retailer said in November that first-half profit rose 40 percent as it sold more food and clothing, and had a one-time pension gain of 95 million pounds.

"There's no doubt about it that the market has slowed," Rose told journalists. "We have to just batten down the hatches."

Agencies

(China Daily 01/10/2008 page17)