Denise Mahoney: First profits slip since 1990

The company pointed to a "clear decline in consumer confidence" as one of the main factors in the decline and said it does not see any improvement in the near-term.

Retail consultant Robert Clark explains the reasons for Marks & Spencer's poor performance

M&S anounced a first half-year, pre-tax profit of £348.2m before exceptional items, compared to £452.3m in the same period last year.

M&S also blamed the setback in its overseas business and its expansion programme at home.

The fall in profit is the company's first since 1992 during the last recession and saw its shareprice fall on the market's opening.

At 1318 GMT M&S shares were trading 13% lower at 388¾ pence, after dropping 60¼ pence.

Expansion plans cutback

In the UK, M&S has been converting 19 Littlewoods stores to the M&S format, while renovating a number of its existing stores.

It says the costs associated with these projects have eaten heavily into profits.

The company said the strong pound dragged down turnover in continental Europe and in the Far East. Furthermore, it says there are signs of a slowdown in US retailing, where it owns Brooks Brothers.

Marks and Spencer announced a £2bn investment programme last year, £800m more than its normal level of investment.

Expansion cut by £300m

The company now says that in the adverse trading conditions it is reducing its expansion plans by £300m.

M&S says the next six months are hard to forecast. The company makes 40% of its annual profits at Christmas, but says that since trading is so difficult at the moment it does not expect the fall in profits to be reversed when it publishes its final results in six months' time.

Sales climbed a modest 1.8% on the back of an increase in selling space.

There was extra provision for £64m for exceptional items.