The tough trading conditions on Britain's shopping streets were underscored yesterday when Marks and Spencer, one of the country's iconic retailers, issued a profits warning after a drop in sales over the Christmas period.

M&S, which last year fought off a £11.1 billion (€15.9 billion) hostile takeover bid from billionaire retailer Mr Philip Green, said it suffered a 5.6 per cent drop in like-for-like sales in the six weeks to January 1st.

It said full-year pre-tax profits would be between £600 million and £625 million compared with consensus forecasts of £675 million.

Mr Stuart Rose, who was brought in as chief executive last May to see off Mr Green's bid and revive the fortunes of what was once the star of British retailing, said: "Christmas was not great."

Early indicators from across the sector suggest that profit margins were squeezed as companies cut prices to maintain volumes. Mr Ian McCafferty, chief economic adviser of the Confederation of British Industry, said: "If, as is likely, widespread discounting drove December's increase in sales volumes, then value and profitability will have remained subdued."

Yesterday also saw JJB Sports, another British high street retailer, issue a profits warning. It said margins were down 1.6 per cent.

Earlier in the week Woolworths and House of Fraser, a department store group, also said seasonal business had been poor.

Other British retailers have fared better and many have yet to report their Christmas figures. But macroeconomic indicators suggest retailing is in the early stages of a tough period, with consumer sales following a downward trend since the middle of 2004.

Analysts yesterday gave Mr Rose the benefit of the doubt over the weak Christmas performance as some of its causes could be traced to the failings of past management, but said the pressure to deliver improvements had increased. - (Financial Times Service)