Marks and Spencer (M&S) announced today that the lead-up to Christmas was "more challenging" than expected.
Sir Stuart Rose, the retailer's chief executive, reported a fall in sales over the key Christmas trading period when M&S would have been hoping to make much of its yearly revenue.
The disappointing figures have added to worries about lower UK consumer spending and may indicate a larger slowdown in the economy as a whole.
Like-for-like sales for M&S fell 2.2 per cent in the UK in the 13 weeks up to the end of December, while general merchandise dropped 3.2 per cent and food sales were 1.5 per cent.
This has been reflected in the company's share price which has dropped more than 20 per cent today from yesterday's close at 503p to 400p after release of the news, making it M&S' worst Christmas performance in two years.
Sir Stuart said British businesses were experiencing a "real crunch" with costs, such as energy prices, rising, but weaker consumer spending meaning they were not able to increase prices.
The announcement also noted that market conditions would remain tough through 2008 but the M&S chief remained optimistic.
"We are well positioned with a strong product offer and better than ever values across our business," Sir Stuart said.
"We now have 70 per cent of our stores in the modernised format and a strong pipeline of new space for 2008 and beyond."
M&S is not alone in this slowdown. On Monday, the British Retail Consortium said that UK retailers had experienced their toughest Christmas performance in three years, with overall sales growing by just 0.3 per cent compared to last year.