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Marks & Spencer Profit in Line, Helped by Bonus Cuts

Marks and Spencer said its adjusted annual profits before tax rose 4.3 percent to 1 billion pounds ($2 billion), broadly in line with analysts expectations, helped by the company cutting its staff bonus.

Chief Executive Stuart Rose said M&S, Britain's largest clothing retailer and a bellwether for the state of consumer spending, had failed to meet its internal targets and so would not pay a bonus.

Instead, it would make a one-off 12.8 million pound payment to store teams.

"We expect market conditions to remain difficult for the foreseeable future and are managing our business accordingly," Rose said in a statement on Tuesday.

Trading for the first seven weeks of the financial year 2008/09 had been mixed with April proving "a difficult month." "May to date has shown a marked improvement although we remain cautious about consumer sentiment," Rose added.

Annual UK like-for-like sales fell 0.5 percent in 2007/08. In the fourth quarter -- when the impact of the credit crunch started to hit consumer spending -- like-for-like sales fell 1.7 percent with general merchandise down 3.1 percent.

Analysts had expected M&S to post an annual adjusted pre-tax profit of 997 million pounds, according to Reuters Estimates.

Rose, who is due to become executive chairman as well as CEO next month, said he planned to spend 800-900 million pounds this year expanding the business.

"We believe there is a real opportunity to expand our business in the UK and abroad, to stretch the brand into new products areas and to develop our Direct business," Rose said.

M&S Direct, its Internet retailing business, grew 63 percent online with market share up 200 basis points to 6.2 percent.

International profit rose 33 percent with 20 percent more space added due to investments in Central and Eastern Europe and India. M&S will open a store in Shanghai in the autumn.