More discounts at M&S as fears grow over profits

Marks and Spencer will launch another massive pre-Christmas price promotion today, as it battles what is understood to be calamitous recent trading, and fears in the City grow about its full-year profits.

M&S is to cut prices by 30 per cent on men's and women's knitwear, its sleepwear range and its upmarket Autograph & Ceriso lingerie. Amid fresh reports of dire trading, it has opted to replace its 20 per cent, one-off sales with alternative promotions.

Retail Week, the trade magazine, said yesterday that sales of core categories at M&S tumbled by between 20 and 30 per cent last week. On 4 December, The Independent reported that underlying sales of clothing and home-related products at M&S fell by 19 per cent for the week ending 29 November. While industry sources said that the retailer's figures are being skewed by its pre-Christmas sales, the City is growing increasingly anxious about its profits.

Yesterday, Nick Bubb, the Pali International analyst, cut his full-year profit forecast by 7 per cent from £640m to £599m. He said M&S's two previous 20 per cent-off sales, on 20 November and 4 December, "look as if they simply pulled business forward and undermined consumer trust in the brand". Yesterday, Ernst & Young, the accountancy firm, revealed that pre-Christmas discounts and promotions have reached record highs – discounts averaged more than 37 per cent of the full selling price since 3 November.

A whopping 67 per cent of retailers said sales volumes were down in the first half of December, while just 13 per cent said they were up, according to the CBI's Distributive Trades Survey.