The city was left reeling yesterday after retail giant Marks & Spencer issued a shock profits warning and Britain’s largest housebuilder Taylor Wimpey admitted it had been unable to secure £500m in funding.
The bleak news from M&S, an industry bellwether, that the consumer downturn was likely to be “longer and harder fought” than previously expected, caused nearly £3bn to be wiped-off the value of retail stocks. The FTSE 100 fell to a three month low . M&S itself plunged 25 per cent to 240p – a fall which lowered the company’s market capitalisation by £1.2bn.
Taylor Wimpey lost almost half its stock market value to close at 35p after the troubled housebuilder admitted it had been unable to raise the funds from investors; that it had scrapped its first half dividend; and that its finance director had resigned.
The company dragged the rest of the wider sector down, with Barratt Developments, Persimmon, Bovis Homes, Redrow and Bellway all dropping between 8 and 29 per cent.
M&S executive chairman Sir Stuart Rose stoked fears by saying he expected other retailers would have to follow suit and issue similar warnings.
“I can’t believe this is a Marks & Spencer exclusive problem, I think this is definitely a retail slowdown and we don’t know where it’s going,” he said.
The company said sales at UK stores fell 5.3 per cent in the 13 weeks to 28 June and its upmarket food business had lost market share as shoppers switched to cheaper rivals. M&S also said Steven Esom, head of food, was leaving after just one year.
Taylor Wimpey chief executive Pete Redfern acknowledged the company’s future was difficult due to market conditions. The company is now in danger of breaching its banking covenants if the housing market does not recover.