Marks & Spencer Annual Profit Climbs, Retailer to Add 10,000 Jobs

British retailer Marks & Spencer reported full-year earnings in line with market expectations Tuesday and said it planned to create 10,000 jobs over the next three years.

But while the annual profit was close to an all-time high for the food and clothing retailer, the company acknowledged competition remained intense and that the retail environment would be more challenging in the fiscal year ending in 2008.

The main reason for cautious outlook is the recent rise in interest rates in the U.K., Ian Dyson, finance director at Marks & Spencer, told "Squawk Box Europe."

Investors were apparently hoping for more robust results and guidance from a company whose stock is up 11% since March. Shares of M&S fell 4.74% before close in London.

The company reported an adjusted profit before tax of 965.2 million pounds ($1.9 billion) for the year ended March, up 28.5% from the fiscal year ago. That was about in line with analysts' expectations of 966 million pounds, according to Reuters. The company reported a record profit of 1 billion pounds in 1998.

Total sales climbed 10.1% from the previous period to 8.6 billion pounds. The company said market share increased in both food and clothing.

Full-year comparable sales rose 6.1%, while fourth-quarter comparable sales declined to 3.8% from 7.1% in the third quarter.

"We feel that we actually had a very good fourth quarter," Dyson said. "Trading conditions were difficult and we were up against tougher comparatives."

"We also had a lot of our portfolio being modernized at the moment, so about 25% to 30% of our space is being disrupted," he added.

In a research note, Citigroup said it still expects fiscal 2008 profit to come in at 1.08 billion pounds, with the company more likely to beat than miss expectations.