The profits of just over £1 billion for the year to March 29 were 4.3% ahead of last year, but came alongside a 1.7% fall in like for like sales during the final three months of the year - the second successive quarter of sales declines after a disappointing Christmas.

Chief executive Sir Stuart Rose said he expected market conditions "to remain difficult for the foreseeable future".

M&S paid out a record £91 million in bonuses to its 75,000 staff last year but has slashed this year's payout after it failed to hit internal targets.

The group will, however, pay out £12.8 million to its 62,000 customer assistants, while a spokesman added that high-performing head office teams could share in a £4 million bonus pot.

Today's results represent M&S's best performance since 1997/98 and exceeded market forecasts of £989 million.

The company now has more than 21 million customers shopping in its store every week, 400,000 ahead of the previous year.

Sir Stuart - who has led the turnaround of the business since 2004 - added that trading since the end of March had been "mixed", with sales suffering in April's downpours before recovering with better weather earlier this month.

The M&S chief also remains cautious over consumer sentiment, although the group still intends to spend up to £900 million on its stores this year.

There were fears in the City over M&S's clothes sales after poor figures from rival Next, but the group cut prices to protect market share as well as extended the range of its Autograph collection.

Like-for-like sales among general merchandise - which includes clothing - fell 3.1% in the first three months of the year, slightly better than most forecasts.

Meanwhile food shoppers could soon be able to buy well known brands such as Marmite and Heinz tomato ketchup at M&S stores for the first time, after the group announced plans to trial the sale of around 350 branded products at 19 stores in Tyneside and Teesside from June.

The pilot forms part of plans to boost its food market share to 5%. The plans also include another 70 Simply Food stores, expanding the range of products on offer, and selling better value everyday items. Like for like food sales fell 0.5% in the fourth quarter.

M&S shares were ahead in early trading as traders responded to the better than expected results.

The company has also identified £50 million in savings through reducing overheads and trimming marketing spending for the coming year, although Pali International analyst Nick Bubb remained doubtful over the firm's prospects.

He said: "M&S have found £50m of other cost savings, but they can't slash the staff bonus twice. The main driver of cost growth this year is the huge amount of new space (the company) is bringing on stream and there is not much that M&S can do to slow that down."

Sir Stuart added the earlier Easter and poor weather had led to volatile trading conditions this year, making it hard to pick underlying trends.

"We are all finding it very difficult to read the tea leaves," he added.
But he argued the company was well-placed to cope with a downturn, saying it was a "strong business in a weak market".

He also defended the lack of bonus payouts for last year's performance because the the group missed internal targets.

"We did not cut the bonus, there was no right to any bonus," he said.