Marks & Spencer is cutting over 1,000 jobs and closing 27 stores after reporting a sales slump over Christmas.

The retailer is closing 25 Simply Food sites and two small main stores, with the loss of 780 jobs.

A further 450 will be shed from head office, Marks & Spencer added.

Like-for-like sales fell 7.1 per cent over the 13 weeks to December 27th, despite two one-day sales events.

This compares with a fall of 3.3 per cent for rival Debenhams, and a seven per cent fall at Next – although Next did not launch any pre-Christmas sales.

Sir Stuart Rose, chairman, said: “We are aware that the proposed changes set out above will be difficult for those members of staff impacted, but given that we expect challenging economic conditions to continue for at least the next 12 months we believe we are taking the right action to maintain the strength of our business.”

In addition to the job cuts, Marks & Spencer is making changes to its final salary pension scheme by capping employees’ annual increases in pensionable pay to one per cent and changing the early retirement benefits for members who joined the scheme before 1996.

The group will also keep tight control of its costs, with capital expenditure for 2008/09 expected to be no more than £700 million, falling to £400 million in 2009/10.

Marks & Spencer also warned profit margins would be hit by discounting, especially in food, falling by around 1.75 per cent when compared to last year.

However, the retailer did say it had maintained its market share in clothing, doing particularly well in kids’ clothes and lingerie.

Shares in Marks & Spencer rose by 1.26 per cent by 08:49 GMT as investors had been expecting a fall in sales after the news was widely reported yesterday.