Goldman Sachs yesterday turned up the pressure on the rest of the high street by picking Marks & Spencer as its clear winner this Christmas.

Just hours before Next prepared to kick off the Christmas reporting season with a key update this morning, the investment bank said M&S was its “top pick”. It put the decision down to M&S’s wider appeal among shoppers, and its “defensive sales mix”, such as value lines and its food offer.

Goldman said it fully expected the gap between winners and losers to have increased significantly over Christmas and gave warning that the outlook for 2008 was “bleak”.

It picked Signet, the jewellery chain behind Ernest Jones and H Samuel, as its most likely Christmas loser. Signet issued a profit warning in November.

Lucy Chamberlain, Goldman analyst, said: “We are expecting a sharper contrast than normal between the Christmas winners and losers and we expect a significant hit to the sector’s profitability given the discounting we have seen in the run-up to Christmas.”

The comments came as Selfridges put itself in the winners camp by confirming like-for-like sales growth of 9 per cent in December.

Paul Kelly, chief executive, said: “Our Christmas trading and a successful first week of our winter sale is a fantastic finale to our strong 2007 performance. Every store has grown ahead of 2006 and one of the stars of the show is our new Wonder Room, which is attracting customers from all over the world.

“We started our sale on Boxing Day, with less stock to mark down than ever before. It’s cleared well and new season merchandise is selling fast.”

Next is expected to post a like-for-like sales decline of as much as 4 per cent in today’s update, compared with a 7 per cent plunge this time last year.

Simon Wolfson, chief executive, has been attempting to “put the magic back” into the brand by revamping stores and introducing more upmarket ranges, a move that is thought to have helped to protect margins.

He became one of the first retailers last October to warn that the full effect of higher interest rates had yet to hit consumers and could do so in the middle of December. Shares in Next have fallen by 25 per cent in the past two months, reflecting the sell-off across the sector. The update comes amid increasing fears that the profitability across clothing retailers has been hit by widespread price cuts and early sales.

Official figures last month showed that sales volumes at nonfood shops were up 5 per cent on last year in November, but by just 0.9 per cent at clothing and footwear stores.

Matthew McEachran, retail analyst at Kaupthing, said: “Rumours of a very soft preChristmas trading period suggest Next will have needed a very strong start to the sale to avoid reporting a poor like-for-like update.

“Given the consumer climate, we suspect initial orders for the new spring summer directory will be weak for the early part of 2008.”

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