Marks & Spencer revealed its worst sales performance in a decade yesterday as it announced that it would close 27 stores and make more than a thousand workers redundant.

Under the company's cost-reduction drive, M&S will close 25 of its 355 Simply Food stores - an abrupt U-turn in a two-year expansion of its convenience food business.

In the last three months of 2008, against the same period in 2007, food sales at M&S slumped by 5.2 per cent, excluding new stores, as consumers turned to cheaper brands.

Sales at the premium chocolatier Thorntons fell sharply, and FishWorks, the restaurant operator founded by the celebrity chef Mitch Tonks, asked for its shares to be suspended.

Yet at the delivery company Domino's Pizza and at Greggs, the Newcastle upon Tyne-based maker of comforting sausage rolls, pasties and doughnuts, sales rose sharply.

Marks & Spencer, which opened its first Simply Food store in 2001, set up its new convenience format quickly, as the economy boomed, opening 168 outlets in the past 20 months alone. Yesterday the company changed tack.

Sam Hart, an analyst at the stockbroker Charles Stanley, said: “Simply Food is particularly vulnerable, given the state of the consumer economy. The prices there put it right at the premium end of the market and as soon as consumer expenditure comes under pressure there will be difficulties.”

M&S said yesterday that it would proceed with the opening of 20 Simply Food stores to which it is already committed. These will be franchise stores, such as those in garages, railway stations and airports.

Sir Stuart Rose, M&S's executive chairman, said yesterday that the Simply Food stores, which constitute about a third of its business, had actually outperformed food sales in its general stores and that the format was still as important as ever. Sir Stuart said: “About 85 per cent of our customers have said they like the quality of our standards - please don't change. About 15 per cent were having a hard time and said, please give us a hand.”

City analysts said that FishWorks might have to sell its ten restaurants, most of which are in fashionable London areas such as Chelsea, Islington, Chiswick, Primrose Hill and Piccadilly.

Chris Moore, the chief executive of Domino's, speaking as his company's share price leapt while most other shares travelled in the opposite direction, said: “There is a view that people want comfort food in these difficult times. It is a business which hinges on people saying, ‘I can't be bothered to cook, I'll treat myself', and that is probably even more the case at these times.”

Ken McMeikan, chief executive of Greggs, said that customers were increasingly “worried about the money in their pockets and how far it will go”. Greggs sold 12million sausage rolls in the four weeks to January 3.

Overall, sales rose 5.3 per cent over last year at Greggs, while sales at Domino's were boosted by 8.6 per cent for the final three months of the year. Saturday was its most lucrative day, with families staying in to watch Strictly Come Dancing and The X Factor.

The chain, which sponsors Britain's Got Talent, said yesterday that it made 30 per cent of its weekly sales during the 5pm to 9pm slots on Fridays and Saturdays, when people settled in for a night in front of the television.

Greg Feehely, an analyst at Altium Securities, said: “People's health and organic pretensions tend to go out of the window in a recession and they'll do what's easier when they're feeling poor. Domino's in particular does well from people staying in on cold, dark nights, feeling poor.”

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