Shares in Marks & Spencer dived as much as 11% yesterday despite comments from executive chairman Sir Stuart Rose that trading in the sector could be finding a "plateau".

His comments came as the retailer posted a 40% decline in profits and slashed its dividend.

Rose said: "I'm not into green shoots' mode but ... maybe this is a plateau at the bottom."

M&S posted a pre-tax profit of £604m for the year to March 28 on sales of £9.1bn, up just 0.4% on last year.

It cut its final dividend by 33.1% to 9.5p to help conserve cash. This is to continue into next year, with the 2009-10 interim dividend slashed 33.7% to 5.5p. M&S said that after this it will seek to grow pay-outs in line with earnings.

M&S shares eventually closed down 27.5p, or 8.1%, at 311.75p, although they are still more than 45% up this calendar year, notably after investors latched on to unexpectedly strong sales figures in March.

The latest stage of Rose's plan to tackle the tough economic environment and lacklustre performance of parts of the business is a programme under the banner "2020 - Doing the Right Thing".

Notably, this is being headed by finance and operations director Ian Dyson, placing him in prime position to become chief executive when Rose steps down in 2011.

Priorities for the scheme include improving information technology and distribution, developing online and expanding the international business. It has launched a new marketing campaign under the slogan "Quality Worth Every Penny".

But many analysts remain wary of the company.

Richard Hunter, of Hargreaves Lansdown, noted: "The continuing retrenchment of the consumer towards cheaper products and the increasing agility of the competition are playing away from M&S."

The company's gross margin has shrunk by 1.7 percentage points this year, suggesting that it is cutting prices in an effort to retain customers.

It faces particular problems in its food business, which has suffered from lower-priced competition from super- markets such as J Sainsbury.

M&S said yesterday it has cut prices on 10% of its food range, marketed as "Wise Buys". Its market share is still down from 4.3% to 3.9% over the year.

The result of the triennial review of its pension fund, expected in November, could lead to it having to pump more money in.

More positively, some analysts believe its substantial freehold property estate gives it a solid base.

M&S Direct also continues to make progress, with total sales up by 51% to £324m.

Rose told investors that trading for the first seven weeks of its financial year has been "broadly in line" with trends in the previous quarter.