Marks & Spencer's share price crashed by 25% today following announcement of a sharp drop in sales of 5.3% for the second quarter. The slump in sales translates into a sharp fall in profits for the same period that defies the retail sales statistics released for May 2008. M&S earnings could fall by as much as 1/3rd for the current financial year on existing expectations of £900 million, as consumers continue to cut back on spending in the face of loss of household equity, increased debt servicing costs and higher energy and food costs.

(Chart courtesy of Bigcharts.com)

Just 2 weeks ago the media obsessed over the release of remarkably wrong retail sales figures for May 08 at an annualised rate of 8.1% that implied that the UK was enjoying a mini spending boom. At the time I warned that an analysis of the the real inflation adjusted average trend in retail sales revealed far from boom conditions, and that the real measure of high street activity would reveal itself in the share prices of retailers as we witnessed today.

The below graphs illustrate the disparity between headline retail sales and real retail sales indexed and averaged for inflation.

By Nadeem Walayat
http://www.marketoracle.co.uk

Nadeem Walayat has over 20 years experience of trading, analysing and forecasting the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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