Analysts cut forecasts amid fears discounts will hurt profits

Kasmira Jefford
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MARKS & SPENCER and a raft of other major high street names were hit by downgrades from analysts yesterday amid fears that discounting and low wage growth will take its toll on spending this Christmas.

HSBC and Oriel both slashed their forecasts for M&S yesterday, warning that weak consumer confidence and further promotional activity was likely put pressure on margins.

Mothercare, Debenhams, Next and Sports Direct also suffered downgrades by Oriel, sending shares in all the companies except the latter tumbling into the red.

“Life is clearly very tough at present for the clothiers. The weather has been decidedly unhelpful and already most high street stores are discounting heavily (and more than last year). We expect that ultimately the disappointments will come on gross margins rather than sales,” Oriel’s Jonathan Pritchard said.

UBS added to the gloom by removing Debenhams from its preferred list of stock, adding that Christmas “raises some questions as to whether the department store model can operate without resorting to heavy discounting”.

The retailer has since come under fire for demanding a 2.5 per cent discount off goods from suppliers.

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