MARKS & Spencer has cut its profit forecasts after it was forced to make price cuts to clear excess Christmas stock.

As the troubled retailer's ill-fated Lifestore in Gateshead closed, it said trading had become more difficult since November and it had been left with significantly more stock, despite holding discount days to kick-start festive trading.

Markdowns for the second half of its financial year, including an estimate for the Easter sale, are expected to be about £40m higher than a year ago.

Like-for-like sales in the six weeks to January 1 were 5.6 per cent lower than a year ago, with clothing and homeware down 8.5 per cent and food 1.7 per cent worse off.

M&S said it expected full-year profits before tax and exceptional items to be between £600m and £625m - far lower than market estimates of £678m.

The announcement puts more pressure on chief executive Stuart Rose, who led the defence of M&S against a £9.1bn takeover by Bhs owner Philip Green last year on a promise to revive the company's fortunes.

Analysts are now watching to see if Mr Green will capitalise on M&S's trading woes by making a new offer when time restrictions on bidding are lifted next weekend.

Price reductions had attracted bargain-hunters since Boxing Day and M&S said its attempts to clear surplus stock had gone well.

Mr Rose said M&S was squeezing stock out "like toothpaste", but the business was now in a much leaner condition.

"You can't judge the business recovery on this Christmas," he said.

"This is something we had to digest, although it has cost a little bit more than I thought it would.

"It absolutely changes nothing about what we are planning to do for 2005/6, which I have always said is our recovery year."