LONDON (AFP) - Marks and Spencer reported a sharp fall in summer sales as it lost market share to rivals, dismaying investors looking for a recovery at the century-old retailer, which recently rejected a multibillion-dollar takeover offer.
Sales from floor space open for at least a year dropped by 5.2 percent in the 10 weeks to September 18 from the same period of the previous year, the retailer said in a trading update.
Non-food sales slumped by 7.7 percent, while food sales declined by 2.0 percent.
Marks described its clothing performance in the summer season as "difficult", with poor sales in core women's wear, lingerie and children's wear.
Home sales were "particularly weak", with the retailer admitting the product was too contemporary for its customers.
The former darling of the British high street is struggling to compete with smaller fashion chains such as Next and supermarket giants like Tesco and Asda, which recently overtook Marks to become Britain's biggest clothing retailer.
The sales fall "underlines the scale of the task ahead, particularly when we've had fantastic trading news out of Primark, Next and Tesco", said Hilary Cook, director of investment strategy at Barclays Stockbrokers.
"This is not a universally bad consumer environment, and it's about to get tougher," she added.
Recent data points to a slowdown in consumer spending in Britain after five interest rate hikes here since November, while the takeover of Safeway by smaller rival Morrison earlier this year is expected to raise competition.
Marks's results contrasted with those of Tesco, which reported Tuesday a 12 percent jump in sales in the first six months of 2004.
Marks sought to curry favour with investors by giving more details on its plans to return 2.3 billion pounds (4.1 billion euros, 3.7 billion dollars) of cash to shareholders, through a tender offer of 332-380 pence per share.
The offer is one of a raft of measures announced by incoming chief executive Stuart Rose in July to fend off a 9.1 billion pound takeover approach from the retail tycoon Philip Green.
But investors appeared unimpressed. The price of shares in the group fell 1.23 percent to 341.25 pence.
"Shareholders must feel very disappointed that Philip Green didn't pursue his interest," said Cook.
Marks's board of directors rejected in July an informal offer of 400 pence per share from Green, the Monaco-based billionaire owner of such British fashion chain stores as Top Shop and Miss Selfridge.
Instead it opted to sell its financial services arm to HSBC to fund the cash sweetener for shareholders.
Marks will hold an extraordinary general meeting on October 22 to approve the tender offer which will close on the same day. The results of the offer will be announced on October 26.