Marks & Spencer has issued a dramatic profit warning after a suffering “marked deterioration” in sales, and announced that Steven Esom will be leaving as head of its food business after just one year.

The high street giant brought forward a key first quarter trading statement to say that like-for-like sales across the business tumbled 5.3 per cent in the 13 weeks to June 28 - the worst sales performance for three years. Clothing and homeware sales were down 6.2 per cent.

Sir Stuart Rose, executive chairman, said it was impossible to predict what would happen to the group’s gross margin over the coming year. “This is effectively an earnings downgrade,” he said.

Analysts slashed full-year pre-tax profits forecasts which had been expected to reach £850 million.

Times Archive, 1974: M&S in the downturn

Since the business of fashion so clearly reflects the facts of life, it is not surprising that in a period of economic uncertainty one should sense some disenchantment with that business

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Nick Bubb, a retail analyst at Pali International, said it would reduce its expectations by at least £50 million to £800 million while Shore Capital cut its forecast to just £750 million.

The warning triggered a £4 billion collapse in the value of retail stocks in the City. Shares in M&S crashed 25 per cent to 250p, an eight-year low. Next fell 11 per cent. Kingfisher, home to B&Q, and DSG International both dropped 8 per cent.

In comments that will send a shudder through the high street, Sir Stuart said he was convinced other retailers would have to follow suit over the coming weeks with warnings of their own.

Sir Stuart, who faces a re-election vote at next week’s annual meeting, said: “What we are seeing is a correction. We have had ten years of boom time, everyone now has to swallow hard and cut their cloth according to their means.

“There was a first dab on the brakes by consumers in November, a second one at the end of January, and this is another marked slowdown. We have a big customer profile and we get a fairly good idea of what is going on.”

Mr Esom joined M&S from Waitrose a year ago and was paid a £500,000 golden hello. Sir Stuart said Mr Esom would be leaving immediately and that his contract would be honoured. John Dixon, currently director of home and M&S’ internet business, will take over in the food business.

Sir Stuart said M&S had been losing share in food and needed a “new set of tricks” to compete given the price war between Tesco and Asda. He added: "Steven has done some useful work but we need to move on. John has 14 to 15 years of experience in foods, he has the benefit of history, he has been through tough times before."

He added: "Four years ago, M&S was a weak business in a strong market. Today, we are strong business in a weak market."

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