Sir Stuart Rose faces an unprecedented backlash at the Marks & Spencer annual meeting next week after triggering a £1.2 billion slide in the group’s share price with an unexpected profit warning yesterday.

Sir Stuart, the executive chairman of M&S, blamed a marked deterioration in consumer confidence for a 5.3 per cent fall in like-for-like sales across the business in the 13 weeks to June 28, its worst performance since 2005. He said that the group would miss profit targets this year but insisted that rivals would have to follow suit with their own warnings.

“Four years ago M&S was a weak business in a strong market,” he said. “Today we are a strong business in a weak market.”

Analysts rounded on Sir Stuart and said that the profit warning raised yet more questions about the strategy at one of Britain’s best-known high street retailers. They said that the decision announced yesterday to remove Steven Esom as head of food a year after paying the former Waitrose executive a £500,000 golden hello seemed harsh, given the more pronounced downturn in M&S’s clothing business.

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Food sales fell 4.5 per cent on a like-for-like basis in the three-month period to June 28, the first quarter of M&S’s financial year, and sales of general merchandise, which includes clothing and homewares, dropped 6.2 per cent. Shares in M&S fell 25 per cent to 250p, an eight-year low.

Analysts said that pre-tax profits in 2008-09 could be as low as £720 million. Two months ago M&S reported profits of £1 billion for 2007-08.

Tony Shiret, a Credit Suisse analyst, said: “This will be seen as a key day in the history of M&S. Regrettably, we feel that the credibility of senior management has been irreparably damaged by both the degree of profit erosion in what was meant to be a relatively defensive company since Christmas and the lack of any clear idea from management that they have a grip on the problems.”

Mr Shiret added that another profit warning was possible this year and that it could spark calls for Sir Stuart to leave. “This is a major, major event today,” he said.

Phil Dorgan, a Panmure Gordon retail analyst, said that at least half of M&S’s problems were of its own making, given structural problems in its food and clothing businesses.

“We don’t accept the argument that M&S is a strong business in a weak market,” he said. “Food is around half of sales and represents a huge problem.”

Mr Esom will be replaced by John Dixon, the director of M&S Home and its internet business, M&S Direct. He joined the company as a management trainee in 1986 and was Sir Stuart’s executive assistant in 2005.

Sir Stuart said that Mr Esom had done some good things but that they had not been executed quickly enough. Mr Esom, promoted to the M&S board by Sir Stuart three months ago, is likely to leave with a payoff of about £300,000.

Sir Stuart has been at loggerheads with institutional investors since M&S announced in February that it would be promoting him to a dual role of executive chairman in a deal to keep him with the business until 2011.

Pirc, the corporate governance watchdog, has urged its members to oppose his re-election at the annual meeting next week. A Pirc spokesman said yesterday: “We’ve made our views on Sir Stuart quite clear.” Other investors said that it was too early to blame Sir Stuart’s new role for the poor trading but voiced concerns over whether Mr Esom would get to keep his £500,000 bonus.

M&S shares have fallen 63 per cent in the past year in a slide that has reduced the group’s market value to £4 billion. When Sir Stuart joined M&S as chief executive in 2004 he was asked to defend a £9 billion takeover bid from Sir Philip Green, the Topshop and Bhs billionaire.

Yesterday Sir Stuart said he was confident that shareholders would show their support at the annual meeting. “I will arrive as chairman and leave as the chairman,” he said.

“Customers are feeling the pinch,” he added. “I have been quite open in saying that I think this slowdown is going to continue right the way through 2009 and there is no sign of relief. We are a lot better placed than we would have been three or four years ago. We are reasonably confident about our medium to long-term future.”

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