THE retailer Marks & Spencer will report one of its worst Christmas trading performances in more than 80 years as a public company, laying bare the full extent of the crisis engulfing the high street.

Britain’s biggest clothing retailer is expected to reveal that sales of general merchandise, excluding food, have tumbled by about 6%-8% during the third quarter and margins have been dented by steep discounting in the run-up to Christmas.

Food sales are expected to have benefited from consumers trading up to premium ranges as a festive treat – but analysts are still pencilling in a sales drop of 5% to 10%. Overall, sales are expected to be down by between 5.5% and 9.6%.

City analysts said the last time M&S reported a quarterly decline of more than 6.3% was a decade ago when in one quarter it notched up a double-digit drop. Back then many rival retailers were reporting rising sales. However, M&S was facing big problems with management.

This time round the dismal festive figures are set against the worst economic slump since the Great Depression and rivals including Next are also expected to report similarly declining sales.

Sir Stuart Rose, executive chairman of M&S, is expected to give an upbeat defence of the business and argue that any comparisons with previous years are meaningless given the turmoil in the economy.

The company is also expected to argue that it traded nimbly through Christmas and held its own against market rivals, but the sales decline is expected to trigger a raft of profit downgrades from analysts.

The average profit forecast for M&S in the financial year to March 2009 is £618m, but the gloomiest retail watchers fear it may struggle to notch up much more than £540m-£570m – against £1 billion last year.

Shares in the business have fallen from a peak of 759p to just 221p, valuing the company at £3.5 billion. Were it not for the credit crunch and a lack of debt finance, the group would be seen as a bid target. M&S, which is entering its 125th year and serves more than 21m customers a week at more than 600 shops in the UK, reassured investors last autumn it had no plans to cut its dividend.

It did announce, however, that it would cut its capital spending programme and slash its advertising budget. Some analysts, though, remain nervous that trading has deteriorated to such a degree that M&S may have to back-pedal at the year-end and cut its payout.

Freddie George, analyst at Seymour Pierce, said: “We believe the trading statement will disappoint, 2009-10 profits will be downgraded and the 2008-9 dividend will inevitably be cut.”

Next is expected to report that sales have dropped by about 6%-7% – the bottom end of City forecasts. Debenhams is expected to report a small single-digit decline in sales after a series of money-off promotions designed to kickstart consumer spending in its stores.

The gloom will only be lightened this week by supermarket J Sainsbury, which is expected to unveil sales growth of about 4% buoyed by consumers switching from higher-priced branded products to own-label ranges.

The trading updates will provide the first real evidence of the damage inflicted on retail chains by the savage downturn in consumer spending. The following week the City is expecting that DSG, the Currys owner, and Home Retail Group, owner of Argos and Homebase, will also report poor Christmas sales.

The downturn has forced weaker retailers including Woolworths, Zavvi, The Officers Club and Whittards into administration.

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