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However, questions over the retail group's succession are bound to arise if trading deteriorates further. Sir Stuart, knighted in the New Year's honours, confirmed that discussions with the board over succession were likely to begin in his fifth year.

The stock is seen as a bellwether for the retail sector but like other retailers it has been caught up in a vicious sprial of price deflation, with prices this autumn 6 per cent lower than they were last year. Sir Stuart said that a cashmere sweater that sold for £69 in 2006, was on sale for £49 this autumn and that men's underpants selling for £1.25 last year were now priced at 60p.

"If you look at volume sales, we have had the biggest Christmas for six years. We gave our customers a fantastic Christmas," Sir Stuart said. "We have sold more goods to more people than we did last year but you have to run very hard to stand still at this level."

The retail group expects price deflation in clothes and home wares to be a continuing factor this year and said that it would continue to offer competitive pricing, without resorting to year-round sales.

Sir Stuart said that Marks and Spencer got into considerably trouble in the early 1990s because it thought it was immune from a market downturn, the company, he said, would not make that mistake again and would continue to keep its pricing competitive.

Analysts questioned whether the market had overreacted to the poor Christmas performance, saying that small positives in the trading updates had been entirely overlooked.

The company's market value has slumped by 25 per cent in the last week, as fears of a poor performance grew and the share prices is now 50 per cent lower than it was last year.

"The market has taken the numbers to be acutely disappointing and, as a result, the share price has been savaged even further," Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers, said.

The UK's biggest clothing seller, said that lowering its prices allowed it to hold market share, with a 10.6 per cent of the general merchandise market and a 4.3 per cent share of the food market.

The company also refused to follow many retailers and resort to discounting in the run up to Christmas and it experienced a strong start to its Christmas sale, with sale stocks now cleared.

Marks and Spencer has been reinvigorated in the last three years, under Sir Stuart's leadership and had seemed set for record £1 billion profits in the full year. Sir Stuart said that it was too early to say whether record profits could still be achieved, with only three-quarters of the year over.

"I am very confident that we will out-perform in the next 12 to 15 months. The point I am making is that it's going to be tough out there and we will all suffer from it," Sir Stuart said.

The veteran retailer said that he would continue with the store refurbishment programme, which is now 70 per cent completed and would carry on with its dedicated food stores opening programme, despite some evidence that Simply Food stores were cannibalising the group's food sales. "You can't stop. We have to be prudent about our plans but we are not in it for just a 12 month game, we are planning here for what happens in 2012," he said.

British retail sales grew at their slowest pace since March 2006 in December, making it the worst Christmas for retailers in three years, the British Retail Consortium said on Tuesday.

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