July 3 (Bloomberg) -- Marks & Spencer Group Plc, the U.K.'s biggest clothing retailer, extended yesterday's record decline in London trading as analysts stopped advising investors to buy the stock and reduced their earnings estimates.

Marks fell 1 percent, its sixth straight daily drop, after losing almost a quarter of its value yesterday. Goldman, Sachs & Co. lowered the stock to ``neutral'' from ``buy,'' while Investec Securities moved to ``hold'' from ``buy.''

Same-store sales dropped the most since 2005, the London- based retailer said yesterday. Marks also ousted its top food executive as a U.K. consumer-spending slump worsened. The slowdown will last two years, Executive Chairman Stuart Rose said. The stock has declined 58 percent this year, the second- biggest drop in the FTSE 350 General Retailers Index.

``Senior management credibility has been undermined both by the disappointing trading news and the extent of reductions to consensus profit estimates,'' analysts led by Tony Shiret at Credit Suisse in London said in a note. He lowered his pretax profit estimates by 17 percent for this fiscal year and 33 percent for next year and kept the stock at ``underperform.''

The stock fell 2.5 pence to 237.5 pence in London, the lowest price since March 23, 2001, rebounding from a slide of as much as 4.4 percent. Yesterday's drop was the steepest since Bloomberg records began in 1988.

Credit Rating

Standard & Poor's Ratings Services cut its outlook on the retailer's credit rating to ``negative'' from ``stable'' and lowered Marks' short-term rating by one level to A-3, a statement released today on its own news wire shows. After U.K. share trading ended yesterday, Moody's Investors Service said it may reduce the company's Baa2 long-term rating.

Marks, which gets almost half its revenue from food, faces increased competition on price from Tesco Plc, Wal-Mart Stores Inc's Asda and J Sainsbury Plc as customers rein in spending to cope with higher household bills. Food sales at stores open at least a year fell 4.5 percent in the first quarter ended June 28, the most since at least 1998, the company said yesterday.

Rose said he expected other U.K. retailers to follow in reporting tougher conditions.

Goldman cut its estimate for pretax profit for fiscal 2009 by 34 percent to 577 million pounds ($1.1 billion) and reduced its 2010 forecast by 47 percent to 430 million pounds in a research report today. Investec now expects pretax profit of 725 million pounds for fiscal 2009 and 820 million pounds for the following year, down 23 percent and 21 percent, respectively.

`Structural Difficulties'

Marks made pretax profit of 1.01 billion pounds before property disposals and one-time items in its last fiscal year.

``We reduced our forecasts significantly to reflect deterioration in the consumer and what we now believe are structural difficulties in both clothing and food,'' Goldman analysts including Lucy Chamberlain said in the note. ``Food delivered a particularly disappointing performance.''

Pali International Ltd. and Landsbanki Securities also reduced their profit estimates today. Pali analyst Nick Bubb cut his price estimate on the stock to 220 pence from 275 pence.

Yesterday's update may be ``indicative of far deeper embedded problems'' in the food unit ``than had previously been believed by investors,'' Credit Suisse's Shiret wrote.

Rose faces a vote over his re-election at the company's annual general meeting next week after some investors objected to Marks' decision to promote him to his current role rather than splitting the roles of chairman and chief executive officer. Pensions Investment Research Consultants, an adviser to funds overseeing more than 1.5 trillion pounds, last week told its clients they should vote against his election.

Rose may ``come under more pressure from further profit estimate downgrades'' should he survive the annual meeting, Shiret said in the note. ``If this results in his departure there will likely be a hiatus before a new CEO is announced.''

Standard & Poor's gives Marks a BBB long-term rating.

To contact the reporter on this story: Louisa Nesbitt in Dublin at lnesbitt@bloomberg.net

Last Updated: July 3, 2008 11:49 EDT