Next, Marks join Tesco, Debenhams to cut prices

Marks & Spencer Group Plc and Next Plc cut the price on many goods by 50 per cent, joining UK retailers trying to tempt shoppers with discounts as consumer spending weakens.

Marks & Spencer, the nation’s biggest fashion chain, and John Lewis Partnership Plc, the largest department-store owner, today started discounting products from cashmere sweaters to flat-screen televisions. Next pledges “absolutely all sales items half price or even less.” Tesco Plc and Debenhams Plc, which began their sales yesterday, lowered prices as much as 70 per cent in what they describe as the most aggressive holiday clearance on record. “We know customers are interested in bargains,” Dan Knowles, director of selling operations at John Lewis, said today in a telephone interview.

“We think this is going to be a pretty powerful time.” He predicted a tougher environment in 2009, saying “January overall will be much slower.” Retailers are battling for customers as banks rein in lending and consumer spending slows. The economy contracted 0.6 per cent in the third quarter, the most since 1990. A survey by the Guardian newspaper and the Institute of Credit Management, published today, found that 86 per centof 1,003 people expect to live more cheaply next year.

“We’ve seen the traditional stampede of customers looking for the first bargains,” Knowles said. Takings in the first hour of trading at John Lewis in Cribbs Causeway near Bristol, western England, matched the amount for the same time last year.

While shopper numbers may have been maintained by discounts, lower prices squeeze retailers’ margins.

“We’ve seen retailers doing a lot of discounting that they aren’t set up to do,” said Knowles. “They’re educating their customers to wait until discount days. Next year is going to be difficult for retailers who don’t have a strong value proposition.”

Marks & Spencer may say in January that profit won’t meet analysts’ estimates and that it will cut its dividend, according to a note e-mailed on December 23 by the brokerage firm Seymour Pierce. Marks closed unchanged December 24 at 213.25 pence, having fallen 62 per cent so far this year.

Debenhams has fallen 70 per cent, while Tesco and Next are down 29 per cent and 33 per cent respectively.