Marks & Spencer’s chief executive Steve Rowe has warned that profits are likely to be hit in the short term before seeing the results of his turnaround plan.

For the year to 2nd April, underlying profits rose 4.3% to £689 million, but Mr Rowe, who took over the job last month, has said that changes are needed to lower clothing prices and improve style, fit and quality.

In a statement, Mr Rowe said: “M&S is a great business with a strong customer base and loyal employees and we have much to be proud of.  We also know that we have lots of opportunities to improve and be better for our customers, our employees and our shareholders. We are putting customers right at the heart of our business.

“Our results last year were mixed. We continued to outperform on Food but we underperformed on Clothing & Home sales. This is not satisfactory and today we are outlining our initial plans to address the issues and to position Marks & Spencer to deliver profitable sales growth.

“We are clear on the actions needed to recover and grow Clothing & Home, which is our top priority; to continue to grow our Food business; and to focus on driving profitability. We are investing to re-establish our price position by sharpening prices and to enhance service by putting more employees into our stores.

“These actions, combined with the difficult trading conditions, will have an adverse effect on profit in the short term. We are, however, confident that our commitment to delivering the right product, price and service will help return Clothing & Home sales to growth.  This, together with continued momentum in Food, will provide us with a solid base from which to build a long term sustainable business.”

Robert Swannell, chairman, added: "Steve Rowe is today setting out his priorities as our new Chief Executive. His number one priority is to restore our Clothing & Home business to profitable growth, while maintaining the pace of growth and success of our market leading Food business.

"Today we announce a proposed final dividend for 2015/16 of 11.9p resulting in a full year dividend of 18.7p, up 3.9% on last year and broadly in line with underlying profit growth. As part of our ongoing programme of enhanced returns, we are also announcing a special dividend of 4.6p per share (c.£75 million) for the first half of the 2016/17 year. This will be paid to shareholders in July at the same time as the final dividend. We will update on further capital returns at our Interim results in November."

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