THE full extent of weakness on the high street is set be exposed this week, with Marks & Spencer, an icon of middle Britain, expected to report its worst Christmas trading in decades.
After several years of resurgence, M&S is expected to reveal that Christmas sales of non-food items were as much as 8 per cent below last year, despite holding its first pre-Christmas sale in a generation in November, and discounting heavily in Decem
ber.
A fall would come a year after M&S shocked the City by reporting a decline in sales in the lead up to Christmas in 2007.
M&S previously reported a sharp declines in sales a decade ago, however this was primarily due to internal problems relating to the group's management.
This time the company has been hit by the general woes for consumers, who are expected to have traded down to cheaper alternatives on the expectations of declining fortunes in 2009.
Sir Stuart Rose, the group's embattled executive chairman, is tipped to give an optimistic assessment of the group's prospects, arguing that comparisons with previous years are unfair given the turmoil in the economy.
Last week John Lewis, another store closely tied to the shopping habits of middle-class Britain, gave hope to the high street after reporting a 1.2 per cent rise in sales in the week to 27 December, but analysts do not believe that M&S is likely to report a similar upturn. Nick Bubb at Pali International is forecasting a 7 per cent drop in third-quarter food sales and warned general merchandise sales could plummet by 10 per cent.
Freddie George, retail analyst at Seymour Pierce, added that discounting in the lead up to Christmas could mean M&S is forced to provide a profits warning with the sales update.
"As with last year, we believe the trading statement will disappoint … 2009-10 profits will be downgraded and the 2008-9 dividend will inevitably be cut," George warned. Of little consolation to investors is that M&S is unlikely to be alone in reporting trouble this Christmas.
Fashion chain Next is tipped to reveal this week that sales dropped by 6 to 7 per cent in December, while Debenhams, the department store chain that discounted heavily in the lead-up to Christmas, is expected to report a smaller decline in sales.
Only Sainsbury's, Britain's third-largest supermarket group, has a chance of providing some cheer, with the group expected to post a 4 per cent rise in fourth-quarter sales when it updates the City on Thursday.
Meanwhile, Blooming Marvellous became the latest retailer expected to be placed in administration – the latest in a series of companies to be threatened in the wake of the Icelandic banking crisis.
The 14-store maternity clothing chain, which trades in England, last week closed one of its shops and shut down its website.
Blooming Marvellous is owned by Arev, the Iceland-backed retail company which also owns luxury clothing maker Duchamp & Jones and the Bootmaker.
Arev had previously owned royal dressmaker Hardy Anies, which was placed in administration and sold in 2008.
The company's troubles are similar to those of Baugur, another Icelandic retail specialist, which is locked in talks with the Icelandic government about its debt pile, believed to be in the region of £1 billion.
Baugur, which owns the Jenners store in Edinburgh and the rest of the House of Fraser chain, could end up being at least part-owned by the Icelandic government.
Elsewhere Mosaic, the owner of fashion chains Karen Millen, Oasis and Principles, is reportedly locked in talks with Icelandic bank Kaupthing over working capital requirements.
The chain, also part-owned by Baugur, has an estimated debt pile of £400 million. It has been hit in recent months by suppliers demanding up-front payments after credit insurance was withdrawn.
