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Consumers are spending less, and they're spending it differently, but how does that affect a business like Marks and Spencer (LSE: MKS.L - news) (LSE: MKS (MKX.TO - news) )?

Even in a recession, people need food, but do they need M&S food? It's clear that many people are shopping down a level in terms of quality (or perceived quality), and that at the lower end Aldi and Lidl are benefiting.

But while brands towards the premium end, like M&S, will lose out, they also have the opportunity to pick up business from people choosing to spend the night in rather than eating out. M&S has successfully capitalised on that trend with its 'Dine in for £10' offers.

Clothing, however, is different: If you want a new coat you may choose M&S over a designer label, but do you really need to buy a new coat?

So what is the net effect of these threats and opportunities to the company's business? According to yesterday's trading statement, it's a drop in like-for-like sales of 6.1% -- that's 5.9% down in food, and 6.4% down in clothing and household. Ouch.

Apparently it's not as bad as the market expected, though, as the shares have rallied 20% from their intra-day low on Tuesday. And when I say 'low', I do mean low -- this week saw prices not seen since early 2001. Trading today at 230p, the shares are 70% off their peak of eighteen months ago.

The company is forecast to pay a mouth watering dividend yield of 10% this year and next, but of course the question is whether this is realistic and sustainable. At these prices, clearly the market is sceptical, but management know the importance of dividends to M&S investors.

I'm sure that maintenance of the dividend was a major consideration in the announcement to slash capital expenditure from £800-900m to £700m this year, dropping to £400m next year. Dividend cover was expected to fall from around 2x to 1.42x this year, and to 1.25x next year, so there's not much room for manoeuvre if things get particularly bad, or if the downturn is protracted.

A bigger issue is whether it's just a question of weathering the storm. A recent article in Marketing Week described M&S as a tired old brand that's coming the end of the road. I don't share that view.

While the yield is very tempting, and history may show that this was a great time to buy, I just feel that M&S's offering is just too ... discretionary. This recession could last for years, so I'd really need to see some light at the end of the tunnel before committing any cash to M&S. By which time it may be too late, but that's a chance I'd rather take.