LONDON MARKETS: Marks & Spencer Touches Multi-year Lows As London Drops
Friday July 4th, 2008 / 12h41
By Sarah Turner Shares in retailer Marks & Spencer fell to a level not seen since late 2001 on Friday, amid continuing gloom about how retailers are going to cope as growth in the U.K. economy slows. Marks & Spencer , which sells food, clothing, homeware and general merchandise, saw its shares fall 4.5% to 225, making the company one of the sharpest decliners in the top London FTSE 100 index which was down 0.5% to 5,450.90. Shares hit a low of 221 pence on Friday, compounding heavy losses sparked earlier in the week by downbeat quarterly sales figures. Sales at the British part of the company's business performed particularly poorly, with Marks & Spencer blaming difficult markets and ebbing consumer confidence for the weakness. The update on Wednesday resulted in a one-day loss of almost 25% for the company's shares. Brokers quickly stepped in to downgrade ratings and earnings estimates in the following days, with Citigroup becoming the latest in a long line to do so on Friday, double downgrading the firm to sell from buy. "At this early point in the current U.K. consumer down cycle, with growing input cost pressures across both the general merchandise and food businesses, the M&S profit and loss outlook still remains opaque and earnings forecast confidence low," the broker said. Meanwhile, downbeat sales data from privately-owned British retailer John Lewis out Friday also didn't help restore confidence in retail sales trends, at least for non-food sales. John Lewis said that its overall sales fell 1.9% to 130.14 million pounds in the week ended June 28, compared to the same point a year ago. Department store sales fell 8.3% to 53.01 million pounds, while food sales rose 3% to 77.13 million pounds. "There is no doubt that trade in our shops proved challenging when compared to exceptional results last year," said Phil Hullah, commercial director. Supermarket groups sold off this week on the back of Marks & Spencer's poor food sales figures. However, signs that investors might be reassessing this view appeared on Friday. Shares in supermarket operator J Sainsbury advanced 1.9% after Qatar Holding upped its stake in the firm to 26%. Qatar Holding increased its shareholding by 12.37 million shares to 454.5 million shares. Peers were also higher, with Tesco shares up 2.9% and William Morrison shares up 3.7%. Bradford & Bingley drops More trouble for one of the banks most connected to the housing market also weighted on sentiment. Shares in stricken U.K. mortgage bank Bradford & Bingley fell another 9% after it said late Thursday that private equity group TPG Capital has withdrawn from a deal to inject cash, but that major shareholders will still back a 400 million pound ($793 million) capital raising. The bank said TPG withdrew after rating agency Moody's downgraded the group's long-term debt ratings to Baa1 from A3. Other banks trading in the red included HBOS , down 1.4%, Alliance & Leicester , down 5.2% and HSBC Holdings , down 1.3%.
