When Justin King, the chief executive of J Sainsbury, takes to donning Marks & Spencer ties and hinting about wearing its underwear, it can mean only one thing - the race to succeed Sir Stuart Rose in the biggest job in retail is under way.

Sir Stuart will step down as executive chairman of M&S on July 31, 2011, and the battle to replace him is likely to grip the high street over the next 18 months.

Mr King, a former M&S head of food, is one of the early favourites, despite the flagging revival of his supermarket chain, and City experts believe that he would love to be given the chance to return.

An interview last week, in which he wore an M&S tie and joked about the company's briefs, did little to nip the speculation in the bud.

Greg Lawless, a Blue Oar Securities retail analyst, said: “M&S is a much bigger job and he'd die for the chance.” The race comes as analysts predict that succession issues could come to dominate the sector over the next year as retailers brace themselves for even tougher trading.

As well as speculating about M&S, industry observers are eager to see how Sir Terry Leahy, the Tesco chief executive, plans for the appointment of his successor. He has led Tesco for 11 years and much of his initial success was attributed to the smooth handover when he took charge.

A senior banker told The Times: “If you look around the industry, you have got quite a few chief executives in retail who have been in the post for three or four years or more. Justin has been at Sainsbury's for four years, Stuart has been at M&S for four years, Kate Swann at WH Smith for something like four to five years and it feels like Sir Terry Leahy has been at Tesco since 1840.

So a lot of people have been in their posts for longer than most chief executives and I think that next year succession issues will come much more to the fore.

“What's interesting is that when vacancies are talked about, it's always the same people mentioned as replacements, like Andy Bond [of Asda] and Kate Swann. People are wondering where the next generation will come from.”

Halfords announced in June that it had chosen David Wild as its new chief executive and the move took many by surprise. Only two years ago Mr Wild left Tesco for a new role as head of business development at Wal-Mart, the largest retailer in the world, and many expected him to stay.

Analysts emphasise that, although Halfords succeeded in landing an impressive executive, there seems to be a dearth of up-and-coming talent at senior managerial level. Big things are expected of Colin Holmes, who returned from a year's sabbatical this year to become Tesco's commercial director for fresh food, but few others get a mention.

One banker said: “You get the feeling there's quite a lot of change coming at executive level, but there's not a lot of talent. Just look at M&S - below Stuart, there's nothing else.”

Sir Stuart conceded in February that one of the reasons for extending his contract for two years, until 2011, was to give potential successors the time to prove themselves. Ian Dyson, Sir Stuart's No 2 in the boardroom, has been handed a fuller role of group finance and operations director and has impressed.

One source close to the company said: “He's basically in control of all the plumbing and it's working well.”

Carl Leaver's role at M&S has been extended beyond international director to include homewares and e-commerce to give him greater experience; Kate Bostock, M&S's head of clothing, is regarded as another internal candidate for the top job.

Sir David Michels, the M&S deputy chairman, is thought to prefer a successor from inside the company. External dark horses could include Marc Bolland, the chief executive of Wm Morrison, and Charlie Mayfield, chairman of the John Lewis Partnership.

Mr King's stint at M&S at the start of the decade may work in his favour, not least because of his role in developing the Simply Food concept.

Luc Vandevelde, who left as M&S chairman in 2004, said: “I am a great fan of Justin King and was pleased to recruit him to M&S. Simply Food was one of the initiatives which convinced Justin King to join M&S. He deserves a lot of credit for the successful rollout of the concept.”

Place your bets.

Times Recommends

• US jobs plunge in worst fall since 1974
• Brown will press banks to pass on full rate cut
• Woolworths axes 450 staff amid firesale