Q&A: What is M&S up to?

Pressure continues to mount on Marks & Spencer as its latest trading statement shows a further dip in total sales and in clothing. BBC News Online explains what is happening and why.

What has M&S announced today?

It has reported a further sharp slump in clothing sales. Sales in the store's core division of clothing, footwear and gifts were down 9.1% during the 14 weeks to 7 July.

Once again it was food which shone brightest for the chain, with a 5.9% - or 4.8% excluding new or extended stores - rise in sales.

In recent years, British shoppers have drifted away from M&S, having found it less good value than it used to be.

M&S has suffered from being undercut by discounters such as Matalan. At the other end of the market, it has failed to convince shoppers to pay the higher prices it wants for new designer-led ranges.

What has M&S done to turn its business around?

Belgian Luc Vandevelde took the helm at M&S early last year, promising to turn the store around. His famed optimism has so far failed to deliver concrete results.

The group has unveiled new ranges and an advertising campaign as part of its efforts to entice shoppers to return, again to no avail.

The retailer has said it wants to focus on increasing profits in its UK business. To this end, it closed all of its 38 directly-owned continental European stores and sold its US businesses Brooks Brothers and Kings Super Markets. Ten stores in Hong Kong are being franchised.

The Direct catalogue business is being shut down. About 5,000 job losses are likely, mostly in Europe.

What difference will the closure of its stores abroad make to UK shoppers?

M&S says it can now concentrate fully on revamping UK stores. Two-thirds are scheduled to be refurbished by April 2002 in an acceleration of previous plans.

This will mean more than a lick of paint. Expect more attention to food, home and beauty products.

And watch out for the first womenswear collection from George Davies - the clothing "guru" behind Next's early success and subsequently the popular "George at Asda" range.

What's the future of the more upmarket collections?

M&S will return to selling only own-brand products. A diversification into designer-branded ranges - only introduced fairly recently - has proved unpopular and is being abandoned.

A return to more traditional M&S wear - what it calls "classically stylish" clothes - is on the cards. Prices are expected to fall.

How had the international businesses been performing?

M&S has had stores in Europe since 1975 and operations in the US and the Far East since 1988.

In the past year, sales had modestly improved - up 3.5% in non-UK Europe, 5-6% in the US and 4.3% in the Far East.

But previous years have been tough, with operating losses recorded.

M&S closed dozens of non-UK stores last year and shut down its Canadian operations.

M&S has come to the conclusion that the ups and downs of its international operations are a distraction. Today's announcement accelerates and deepens a process that was already underway.

What does this mean for M&S shareholders?

Shares in the retailer rose by eight pence to 257 pence, having shed more 4% in recent days as investors anticipated more bad news. Last year, its shares hit ten-year lows and with the continued publication of poor sales figures, it is unclear when they will make any substantial recovery.

M&S has also been downgraded by the ratings agency Moody's Investors Service, a move which will raise the cost of its debt.