M&S sales plunge but cost cuts boost shares

By James Davey and Mark Potter

LONDON (Reuters) - Retailer Marks & Spencer reported its biggest fall in sales for a decade but a plan to cut up to 200 million pounds of costs, including 1,230 jobs, raised hopes it could protect profits and dividends.

Shares in Britain's biggest clothing retailer, which had dropped two thirds in value over the past 20 months and underperformed the DJ Stoxx European retail index by 50 percent last year, rose as much as 8.4 percent on Wednesday.

They closed up 2.2 percent higher at 244 pence.

Executive Chairman Stuart Rose said he expected challenging economic conditions to continue for at least the next 12 months.

"Every company has to cut its cloth according to its means and we are just making sure that ... our company is well placed to deal with what will be an incredibly difficult year," he told reporters.

A spokeswoman said Rose did not intend to take a pay rise this year and did not expect a bonus.

The 125-year-old clothing, food and homewares group said like-for-like sales in Britain fell 7.1 percent year-on-year in the 13 weeks to December 27, its third quarter. It was the biggest fall in sales since 1999.

Forecasts were for a fall ranging from 5.5 to 9.6 percent, according to a company poll of nine analysts.