The gloom on the high street has continued to hurt Marks & Spencer, which this morning reported a sharp drop in like-for-like sales, down 6.1 per cent, in the face of "fragile" consumer confidence and an "unpredictable" retail environment.

The retailer was the first to warn of the increasingly difficult trading conditions with a shock profits warning in July and today's trading statement, brought forward by a month, underlined the difficulties the company is having.

In a sign that things could get worse before they get better, the retailer said it would cut investment in the business and put tight controls on costs as it battled to steer its ship through turbulent times.

However, the shares bounced up almost 8 per cent in early morning trading, as investors expressed relief that the news from the main high street bellwether was not worse.

Sir Stuart Rose, executive chairman of the retailer, said an interest rate cut next week would send a confidence-boosting signal to consumers, but added that the current clouds over the high street could get worse.

"It would be a brave person to say we are at the bottom ... there is a lot of uncertainty about,” he said.

The current financial turmoil added to the difficulties faced by all retailers, he said. “People are worried about where their money is and the security of their savings and that is bound to have some spill-over effect into consumer confidence,” Sir Stuart said.

The chairman said it was “the right thing to do” to sacrifice some margin within its food business to help customers, although he remains determined that M&S will not compromise on quality.

Sir Stuart’s position at the helm has come under question as trading turns sour, with almost a quarter of shareholders who voted failing to back his reappointment in the summer. But he said today that his future was “not a question worth speculating on” — with the current climate calling for “seasoned old chaps” and “a steady hand on the tiller”.

Total UK sales fell by 1.6 per cent for the quarter to September 27, while sales in general merchandise fell by 2.9 per cent.

Clothing sales were down 3.5 per cent and food sales fell by 0.5 per cent. Homeware bucked the trend, showing a 2.9 per cent increase in the period.

On a like-for-like basis, which does not count new stores or new space, general merchandise sales in the UK fell by 6.4 per cent, while food sales dropped by 5.9 per cent.

Sir Stuart said: “Consumer confidence remains fragile and the retail environment unpredictable. Consumers are increasingly cautious about their budgets. We have responded by offering our customers better values and more promotions across the business, while at the same time tightly controlling our costs."

He added that the gross margin for the UK business would be lower this year than last, as a result of the promotions the group was running.

Capital expenditure for the year has also been cut back, hitting the store refurbishment programme significantly. Compared with previous guidance of spending in the region of £800 to £900 million, Sir Stuart said that spending was likely to be in the region of £700 million.

Next year the capital expenditure programme will fall to £400 million, the company admitted, as the business seeks to avoid having to cut its dividend.

Shares in Marks & Spencer have fallen by two thirds in 18 months, hitting a 7.5 year low of 191p on Tuesday.

Nick Bubb, retail analyst at Pali International, said the bad news on M&S's falling sales was offset by the firm action the group was taking on costs and prudent reductions in capital expenditure. "With the worst Christmas for at least 30 years coming up for non-food retailers we wouldn’t get carried away, but the shares have fallen far enough in the short term and M&S is off the hook for the time being,” he said.

Paul Deacon, analyst at Landsbanki, said: "Our feeling is that we are yet to see the worst of the current slowdown, while the business seems to be losing market share in both main markets and so we remain wary of forecasts and share-price prospects in the near term."

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