LONDON — Marks and Spencer Group plc has become the latest victim of the deepening credit crisis here, with a 43.6 percent decline in first-half profits.

This story first appeared in the November 5, 2008 issue of WWD. Subscribe Today.

The store, Britain’s largest clothing retailer, said Tuesday that profits in the six months to Sept. 27 fell to 221.7 million pounds, or $430 million, from 393.3 million pounds, or $763 million, on the back of weak sales and declining consumer confidence. All figures have been converted at average exchange rates for the period.

The outlook for the rest of the year is gloomy: chairman Stuart Rose said Britain is now facing “the most difficult retail conditions since the early Nineties.”

He called trading in October “volatile” and said macroeconomic events were further eroding consumer confidence.

Seymour Pierce research said there were no great surprises in the six-month results, and the bank will not change its “sell” recommendation on the stock, which closed up 7.7 percent at 2.38 pounds, or $4.61 on Tuesday.

Total revenue rose 0.8 percent to 4.21 billion pounds, or $8.16 billion, from 4.18 billion pounds, or $8.11 billion. In the U.K., overall sales declined 1.1 percent in the period, while underlying sales — which strip out the impact of new stores — dipped 5.7 percent.

U.K. clothing sales fell 3.5 percent, while general merchandise revenues dropped 2.8 percent. Sales of homeware rose 4 percent, while sales of food grew 0.5 percent.

Rose said M&S would move forward on a tight budget: The company is aiming to keep a lid on costs, with growth expected to be 4 to 5 percent for the full 2008-09 fiscal year.

Capital expenditure will be cut back to 700 million pounds, or $1.36 billion, in 2008-09 and further reduced to 400 million pounds, or $776 million in 2009-10.

The investment focus at M&S will shift from store modernization to supply chain and information technology.

The company also said it would seek to sell off nonstrategic assets, and bulk up its international business to 15 to 20 percent of group revenues. M&S currently has 291 stores outside the U.K., and sales growth from those stores was the bright spot on the balance sheet, rising 23.9 percent in the half.

Most of the new international stores are local partnerships and franchises in emerging markets such as India, China, the Middle East, Russia, Turkey and Cyprus.

First-half profits in the period were further dented by an extraordinary gain of 95 million pounds in the corresponding period last year. The company plans to give an update of third- quarter sales on Jan. 7.

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