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City worries hit M&S forecasts

Marks & Spencer had its profit forecasts slashed this week amid concerns in the City about slow clothing sales.

Credit Suisse cut its profit forecasts for M&S by 8% to £830 million for 2008/09 ahead of the retailer’s preliminary results on May 20, because of the difficult trading environment comp-ounded by weather issues.

Its initial 2009/10 forecast was cut by a further 11.5% to £735m. Credit Suisse analyst Tony Shiret said he anticipated a 3.4% slump in like-for-like sales of general merchandise this year followed by a further fall of 2% in 2009/2010. He added that he believed middle-market fashion retailers were trading about 4% below expectations.

Credit Suisse said in a note: “We believe that mid-market clothing retailers have found the severity of trading conditions greater than they had planned for, leaving issues in their minds about the likely impacts on near-term profit delivery and, more importantly, the depth and duration of weaker spending.”

Meanwhile, Luca Solca, senior retail analyst at Bernstein, said in a conference call last week that M&S was “fighting a battle” to keep up with the supermarkets that had lower costs and cheaper prices.

Last week, M&S opened its largest store in London for nine years in Colliers Wood, in the south-west suburbs. The 100,000sq ft store is jointly located with a Sainsbury’s superstore on a retail park.

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