Marks & Spencer – As Good as It Gets?

Patrick Allen, |CNBC Senior News Editor

The 126 year old UK retailer has managed to post a rise in holiday sales for the first time in 2 years.

Unfortunately for the clothing and food giant's shareholders, the meager 0.8 percent growth for the 13 weeks to December 26 may be a high point for outgoing chairman Sir Stuart Rose who is due to give way to Marc Bolland some time in 2010.

The retail giant believes the UK consumer is facing a very uncertain year and predicts after the next election its customers will face "tough medicine" as the next government raises taxes and cuts spending to bring the budget deficit under control.

A small cut in VAT has already been withdrawn by Gordon Brown's government and M&S, which owns 650 stores in the UK, is seeing far better growth at its 300 international outlets.

Drilling down into the numbers, the underlying sales growth missed forecasts and its food division had a difficult 3 months as up-market rivals such as Waitrose saw Christmas sales jump by 20 percent.

The group's clothing sales rose by 1.2 percent, but without any guidance on margins it is difficult to know if the sales came at the expense of profit growth.

Shares are trading sharply lower and the big question now for the entire UK retail sector is how the next few months play out.

With footfall sharply lower over the New Year weekend, we could be in for a very difficult third quarter. Geoff Cutmore and the Squawk Box Europe team quizzed M&S CFO Ian Dyson on the numbers.