Shares in UK retailer Marks and Spencer rallied this afternoon after a fall in early trading in the wake of a downbeat sales and profit forecast from analysts Pali International.

M&S shares stood at 224p, up 1.93% on the day, at 15:32 BST today (29 October) after yesterday's move from Pali to cut its sales and profit forecasts led the stock to tumble earlier this morning.

Pali analyst Nick Bubb said tough conditions in the UK retail sector and the prospect of a challenging Christmas period had led him to slash his forecasts for M&S.

"After a poor October on the High Street and with the outlook for Christmas looking ever more grim, forecasts need to be reviewed again, ahead of the interims next Tuesday," Bubb wrote in a note to clients.

"We currently assume second-half like-for-like sales down 6-6.5% at M&S, but that could easily be nearer -8% in this environment and that takes our full-year PBT [profit] 2008/9 forecast down from GBP670m - just below consensus - to GBP640m."

Bubb also cut Pali's rating on M&S shares from 'neutral' to 'sell'.

The downbeat forecast from Pali came a week before M&S unveils its interim results. Earlier this month, the company posted a 6.1% drop in domestic like-for-like sales as consumers reined in spending on clothes and its premium food.

For the 13 weeks to 27 September, the group posted a 6.4% drop in like-for-like general merchandise sales, which includes clothes and home furnishings, and 5.9% decline in food sales.

The figures showed that sales fell faster during the company's second quarter. In the first quarter to 28 June, M&S saw like-for-like sales fall 5.3%, with food sales down 4.5%.