MARKS & Spencer executives have warned it could face a highly-promotional Christmas market as it unveiled a 3.3% drop in first-half profit, although the fall was more modest than the City had expected.
The news keeps the pressure on Marc Bolland, who took the helm at M&S in May 2010 after leaving supermarket chain Wm Morrison.
Mr Bolland is half-way through a three-year reform plan at the retailer but the company has posted its second consecutive fall in first-half profit, which it blamed, in part, on the weather.
The UK's biggest clothing retailer, which has 67 stores in Scotland, saw pre-tax profit fall to £297 million in the 26 weeks to September 29 against £307m for the same period last year.
Analysts had expected earnings of around £280m.
UK like-for-like sales were flat in the second quarter, with a 1.8% fall in general merchandise sales offset by a 1.6% rise in food. Analysts had forecasted a 2.5% fall in general merchandise sales and a 1.5% rise in food.
Mr Bolland insisted that M&S has learned from availability problems earlier this year that saw it sell out of popular items.He highlighted a revamped team at the top of its general merchandise arm which is now led by ex-food chief John Dixon.
Six months ago Mr Bolland slashed sales targets and scaled back store opening plans as M&S struggled to retain its hold on female shoppers.
The 128-year-old group said recent trading had been "volatile".
M&S, which trades from 730 UK stores to 21 million Britons a week, said it was "well set up" for Christmas trading.
But finance director Alan Stewart said the company is "cautious" about festive trading. "We see promotional activity not diminishing," he said.
But he indicated that M&S would not remain aloof from widespread discounting.
"In a promotional market we would be there and giving our customers the value that they wanted," he said.
M&S is planning to offer 300 new food lines this Christmas, including more deli items and "handcrafted" mince pies.
It is also making a major drive to sell cashmere.
Mr Bolland is overseeing a revamp of stores. So far 192 have been overhauled, including those in Edinburgh's Princes Street and Gyle precinct.
M&S said sales at revamped stores are 2.6% ahead of the rest of the estate, figures which it is hoped will mollify investors nervous at capital expenditure due to reach £825m this year.
After coming late to online shopping, M&S now claims 3.4 million website visitors a day and is preparing to open a distribution centre in April.
Mr Bolland said general merchandise sales had improved between the first and second quarters of its financial year.
After availability problems earlier in 2012, Mr Bolland said it had ordered five times as much stock of key clothing items.
He insisted M&S is now "on trend with quality". "Have we been buying the trends sufficiently in the past? Probably not," Mr Bolland conceded.
But he insisted it would continue to differentiate its offering from "disposable" fashion offered by rivals.
M&S shares closed up 10.8p, or 2.8%, at 398.7p.
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