Marks & Spencer staff were today facing a cut in annual bonus payments after the high street giant suffered a disappointing Christmas season.

Shoppers failed to warm to clothing and homeware ranges as M&S announced a 2.3% drop in like-for-like sales for the seven weeks to January 10.

The lacklustre performance led the company to warn that its bonus fund was likely to drop by a third, from £34 million last year. The group employs 65,000 staff and makes awards on an individual performance-related basis.

The difficulties in clothing also cost the job of divisional head David Norgrove, 55, who will leave the board once a successor is found. Analysts are keen for a high-profile appointment to boost the company's standing in a highly competitive sector. Former Debenhams chief executive Belinda Earl is among those being tipped for the job.

The tough conditions in the clothing sector were mirrored elsewhere today with Matalan reporting a 5% fall in like-for-like sales and JJB Sports a decline of 3.5% after strong competition from discount rivals.

The mood was brighter at Dixons where customers snapped up digital cameras and flat-screen televisions to send Christmas same-store sales up 4% in the UK.