M&S sees tough retail climate for 2 years

By Rina Chandran

MUMBAI (Reuters) - Marks and Spencer sees a tough UK retail environment for the next two years, and believes its growing international operations will help offset some of the pain, its chief executive said.

Marks and Spencer said last week it will take a 51 percent stake, the maximum permissible by Indian law, in an Indian venture with Reliance Retail, a wholly owned subsidiary of Reliance Industries Ltd, India's largest listed firm.

"It's going to be difficult for a couple of years," Stuart Rose said of the UK retail environment in an interview with Reuters in Mumbai on Wednesday.

"I think consumer confidence is going to suffer for 18 months, maybe two years. It will probably cut across two fiscal years for us, 08/09, 09/10," he said.

Amid a global credit crisis and forecasts of a prolonged downturn, Britain's retailers have struggled as indebted shoppers cut back on spending because of higher energy and fuel bills and a cooling housing market.

M&S, the nation's biggest clothing retailer, posted its worst quarterly performance in two years in January. Its rivals including Next Plc, Debenhams and Arcadia Group's Topshop have also cautioned about a tough retail environment.

The British Retail Consortium in April said like-for-like retail sales fell in March for the first time in two years and at the sharpest pace in nearly three years.

"I'd be delighted if the downturn only lasted three months," Rose said, describing his estimate of two years as "realistic".