Sir Stuart Rose claimed that Marks & Spencer (M&S) “had a lot of bullets left to fire” as the retailer blamed its underperforming food results on its need to cut prices to compete with mainstream rivals.

The company said yesterday that sales at its food division were flat on a like-for-like basis in the 13 weeks to September 26 and that it had faced deflation of about 2 per cent, against the 4 to 5 per cent inflation seen elsewhere in the food sector. This means that while M&S is shedding market share in value terms, it claims it is holding its share of the overall amount of food sold.

M&S has been losing ground to leading supermarkets and faces a direct challenge to its 347 Simply Food stores from Waitrose’s ambitions to open 300 convenience stores and sell its food through Boots shops.

But doubt was cast on the explanation of M&S’s executive chairman after it emerged that he had underestimated the gap between M&S’s performance and that of its nearest upmarket food rival.

Sir Stuart told analysts that Waitrose’s like-for-like sales growth was just 1.8 per cent against a flat performance from M&S — suggesting that the underlying gap was narrower still. But Waitrose said its like-for-like sales growth was 4.1 per cent during the comparable period.

M&S offered the clarification later that the sales growth of 1.8 per cent referred to the six months to August 1, rather than the past three months.

In total, M&S sales rose 2.7 per cent in the period, slightly ahead of analysts’ expectations, despite a 0.8 per cent fall in like-for-like sales at its home and fashion division. Online sales were up 30 per cent and international sales rose 9.6 per cent against the same period last year.

Shares in the company dipped 12.7p, or 3 per cent, to 362.1p.

Sir Stuart said that he was not troubled by the prospect of increased competition from Waitrose: “We will do what we do. If they want to move into the convenience market, that’s their business, but M&S has got plenty of bullets left to fire.

“There’s been competition in food since people first sold food from market stalls hundreds of years ago. Waitrose is a fine business, but we have an unparalleled track record for quality foods, with innovation over 50 years. We have seen competitors come and competitors go,” he added.

“The actual fact of the matter is our pricing has been sharpened up over the year. We’re cheaper on 1,000 items plus, and we’re getting close to Sainsbury’s in areas. I don’t think that’s popularly or widely known. They have been slightly ahead of us on like-for-likes, but that doesn’t take into account the inflation situation.”

M&S said it was not expecting a rapid improvement in trade next year. Sir Stuart continued: “If you’ve had a year of the recession and you’ve still got your job, you’ve got a bit more confidence. But we know there’s some bad news coming down the tunnel, which is why we’re all a bit circumspect about life going forward.

“It will be a slow recovery. It won’t be ‘spend, spend, spend’ and a quick bounce back.”

He cited the increase in VAT next year, 2011’s income tax rise for higher earners and rising unemployment as factors that would dampen the recovery in 2010.

Greg Lawless, retail analyst at Collins Stewart, warned that the run-up to Christmas for M&S would be “lumpy”, as the comparable period last year took in trading during the worst of the banking crisis but also M&S’s two discounting “spectaculars”.

He added: “They have balanced the stockholding position so there should be no panic discounting, unlike last year when they ran two 20 per cent-off ‘mega days’ in early December.”

John Lewis, the department store that is Waitrose’s sister chain, announced yesterday that it was to close its regional call centres to cut costs. It said it would open two new centres next year in Glasgow and an undecided location in the North of England, likely to be Newcastle or Manchester.

Most of the 700-odd call centre roles will go, although some staff will be able to relocate elsewhere in the business. The two new centres will create 500 jobs. The closures will also be phased to allow as many workers as possible to be re-employed by the John Lewis Partnership.

Andrew Murphy, director of operational development, said: “Having 25 separate call centres is not ideal in terms of efficiency and is also not the best way to ensure that customers always receive excellent service.”

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