M&S set for dividend cut as slump bites

STUART Rose, executive chairman of Marks and Spencer, will today meet with the rest of the board to discuss an expected dividend cut, a decision that could propel the group into a battle with its investors.

Analysts expect M&S’ total dividend payout to be slashed to just 17.4p, a reduction of 23 per cent, just 12 months after it was raised 23 per cent to 22.5p. But house broker Morgan Stanley is even more bearish, expecting it to be halved to 11.3p.

The retailer’s move to cut the dividend, will come as a blow to investors who have enjoyed eight straight years of hikes, but is part of M&S’ decision to focus on conserving cash given slumping sales.

The decision to cut the dividend creates a clash of loyalties for the group between City investors, who will be scrutinising the group’s business model in the recession, and a small band of loyal share holders, who wish to guard their pay out.

Investec analyst Katharine Wynne warned: “Cutting the dividend is not about whether or not the chairman sees it as a humiliation, but about re-setting priorities in the light of a changed world.”

Wynne also called for the group to refocus on its pricing and reinvest in a quality consumer margins.

Rose will also face further pressure to name his successor as chief executive of the group. J Sainsbury’s chief executive Justin King last week dashed speculation that he is a candidate.

Britain’s flagship retailer is tomorrow expecte d to report annual profits of around £620m for the 12 months to March – sharply down from the £1bn achieved in the previous year. Rose is expected to blame the numbers on poor market conditions.