Profit alert from M&S puts Rose on the rack

Sir Stuart Rose was facing the biggest crisis of his career today after Marks & Spencer was forced to issue a shock profits warning, leaving the revolution he has overseen at Britain's favourite clothing store in shreds.

City analysts slashed profit forecasts, with one suggesting they will halve in two years from the £1.1 billion achieved for the year to May.

Philip Dorgan at Panmure Gordon now thinks M&S will make no more than £640 million this year and £593 million next - a dramatic slump that would undermine Sir Stuart's claim to have restored the company to former glories.

The company said like-for-like UK sales in the 13 weeks to 28 June fell 5.3%. General merchandise sales were down 6.2% and food fell 4.5%.

Marks & Spencer's shares went crashing on the news, shedding 60p, or 19%, to 258p.

The profit warning comes just weeks after M&S had a damaging row with the City over Rose's promotion to executive chairman.

Some investors said this gives him too much power - a view that is likely to be repeated at what will be a rocky annual shareholder meeting next week.

The performance at the food arm was especially disappointing, costing Steve Esom his job.

He was brought in as food director from Waitrose less than a year ago, but will leave immediately.

In its trading update today, M&S claimed to be hanging on to market share in areas other than food, hence Esom's firing.

Defending the move, Sir Stuart said: "We need horses for courses. He came into the business at a time when we were in a different position. We had to make a difficult decision. It is unfortunate, but he will not be with us any more."

In the statement to the City, M&S said it "needed to increase the pace of change on a number of operating and trading initiatives".

John Dixon, director of home sales and internet business M&S Direct, becomes the new food director.

The removal of Esom may push Kate Bostock a step closer to becoming the most powerful woman in British business.

The M&S director of clothing was already regarded as a front-runner to replace Sir Stuart when he steps aside in two years' time.

Bostock, 50, is now one of the few serious internal candidates alongside finance director Ian Dyson, although Sir Stuart says that succession planning is not a priority, given how difficult trading conditions have become. Analysts are increasingly concerned about the level of debt M&S is carrying.

It will rise to £3.5 billion by the end of the year, roughly equivalent to the value of its entire property portfolio.

The company does not predict an improvement in consumer sentiment any time soon.

"We expect market conditions to continue to remain difficult, and we are managing our business accordingly," it said.

"Four years ago, M&S was a weak business in a strong market. Today, we are a strong business in a weak market."