John Lewis adds to retail gloom as M&S falls again

By Mark Potter

LONDON (Reuters) - Retailer John Lewis JLP.UL reported a big drop in weekly sales at its department stores and slower growth at its upmarket supermarkets, providing further evidence of a downturn in consumer spending.

The weak sales added to the pressure on rival Marks and Spencer (MKS.L: Quote, Profile, Research), whose shares fell 6 percent to a near 7-year low of 221 pence in early Friday trading after joint broker Citi cut its rating on the stock to "sell" from "buy".

John Lewis said sales at its eponymous department stores dropped 8.3 percent in the week ended June 28, compared to the same week a year earlier, while sales at its Waitrose supermarkets were up 3 percent.

Kaupthing analysts estimated that, stripping out stores opened during the past 12 months, sales fell more than 10 percent at the department stores and were down slightly at Waitrose.

"A double digit like-for-like decline confirms the pinch on spending generally as John Lewis is a slightly better-than-average barometer," they said in a research note.

Marks and Spencer (M&S) sent shockwaves through the retail industry on Wednesday by issuing a profit warning and saying food shoppers were switching to cheaper rivals.

The news added to mounting signs that Britons are tightening their belts amid rising fuel, food and mortgage costs.

The general retailers index .FTASX5370 has plunged about 40 percent this year on concerns of a downturn in spending. An Ernst & Young survey, released on Friday, showed the average household was 15 percent worse off than five years ago.