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.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article