LONDON (Reuters) - Deep discounting tempted cash-strapped Britons to spend over Christmas, squeezing profit margins at retailers who see little sign of business improving as disposable incomes are pressured and the country teeters close to recession.
Bellwether store group Marks & Spencer said on Tuesday it eked out a 0.5 percent rise in underlying sales in the 13 weeks ended December 31, as customers treated themselves to its upmarket foods.
Sales of clothing and homewares fell, however, and the 128-year-old group said it was having to find extra cost savings to offset the impact on profit margins from discounting.
The picture was broadly similar elsewhere, with department stores group Debenhams reporting flat underlying sales over the 18 weeks to January 7.
Industry group the British Retail Consortium said December retail sales rose a stronger-than-expected 2.2 percent, but added the figures were flattered by weak business a year earlier and warned discounting could hit store profits.
"Sadly no-one expects this level of demand to be indicative of the year ahead." said Helen Dickinson, head of retail at accountants KPMG.

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