MARKS AND Spencer’s shares fell by almost a quarter yesterday after a profits warning from Britain’s biggest clothing chain prompted analysts to slash revenue forecasts for the retailer.

Citi, one of the house brokers, said it expected consensus forecasts for full-year profits to come down by 20 per cent – to between £700 million and £750 million, after MS admitted that sales across all its divisions were suffering. The big downgrades came just weeks after Sir Stuart Rose, executive chairman, delivered £1 billion in pretax profits for the year to March 31st.

MS, which was due to announce its first-quarter trading figures at next week’s shareholder meeting, also announced the departure of Steve Esom as head of food, just four months after identifying him out as a possible successor to Sir Stuart, and giving him a seat on the board.

Mr Esom, poached from Waitrose to run MS food just 13 months ago, will be replaced by John Dixon, who used to work as Sir Stuart’s assistant and who has been running MS Direct.

Defending his about-turn on Mr Esom, Sir Stuart said: “We need to increase the pace of change on a number of operating and trading initiatives.”

The disastrous trading update revealed that MS lost share in the food retail market, where the group has performed strongly in recent years, to rivals like J Sainsbury, Tesco and Morrisons where food sales have grown this year.

Food sales fell 4.5 per cent on a like-for-like basis in the three months to the end of June.

Overall, UK like-for-like sales fell 5.3 per cent in the first trading quarter and general merchandise fell 6.2 per cent, in the same period.

“Consumer confidence levels have deteriorated markedly and market conditions have become more challenging” since the group reported full-year results in May, Sir Stuart said.

“Regrettably, we feel that the credibility of senior management has been irreparably damaged by both the degree of profit erosion . . . and the lack of any clear idea from management that they have a grip of problems,” Credit Suisse analysts said in a research note.

MS shares, which have fallen nearly 60 per cent in the last year, fell as much as 23.6 per cent, down 75¼p at 242¾p. Other retailers also fell sharply, with Next down 6.7 per cent, J Sainsbury 6.5 per cent lower and Tesco off by 3.9 per cent.

A rise of 24.5 per cent in international sales and new store openings lifted MS group sales by 1.3 per cent. Sir Stuart said “we are holding market share in clothing, and home [products] continues to outperform”.

The group has demanded price cuts from suppliers in an effort to reduce costs. – (Financial Times service)