M&S to break with 100-year-old tradition and sell big brand foods

The company has revealed it is to run a trial selling 350 branded products, such as Heinz tomato ketchup, Weetabix and Marmite, at 89 outlets.

Details emerged as the company revealed annual profits bust through the £1billion barrier for the first time in a decade despite the squeeze on consumer spending.

Welcome news: M&S has posted its highest annual profits for a decade

The move to introduce the big brands comes as the company tries to boost its share of the UK grocery market to 5per cent.

The plan will reignite speculation that M&S is looking at launching a full-service internet grocery shopping service offering its own labels and the big brands.

Big brands will be available at 19 major stores in the North East of England from June and another 70 Simply Food outlets.

The £1 billion profit figure was up by 4.3per cent in a year, which was not enough to trigger a multi-million pound bonus for chief executive Sir Stuart Rose and senior executives.

At the same time, shop staff have seen severe cuts in the scale of bonuses they will receive.

M&S paid out £91 million to 75,000 shop workers in 2006-07, however the figure will fall to £12.8million to 62,000 for the last financial year.

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

However, the last time, M&S hit the £1billion figure the retail icon went into a long decline of collapsing sales and profits which made it a take-over target.

Sir Stuart explained the move to offer big brands, saying it was about the need to meet changing customer expectations.

He said: 'People say to me, 'Stuart, your food is fabulous but by the way my Johnny likes Marmite, or my husband likes Weetabix.'

Retail analyst Freddie George of Seymour Pierce described the decision as an essential step if it is to introduce a web grocery service.

'M&S can't really push further on the internet, because most people only use it as a top-up shop and the average spend is only £15 to £20. They have to offer other brands to keep the competitive edge, otherwise it's not going to be economical,' he said.

The £1billion profit figure was better than many City forecasts, however Sir Stuart issued a warning of tough times across the high street.

 Market conditions would 'remain difficult for the foreseeable future', he said.

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 3.1per cent in the first three months of the year, slightly better than most forecasts.

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

The company has also identified £50million in savings through reducing overheads and trimming marketing spending for the coming year.

Retail analyst at Pali International, Nick Bubb, is doubtful over the firm's prospects.

He said: 'M&S have found £50million 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.

Under pressure: Sir Stuart Rose, pictured with model Lily Cole, will not get his bonus this year

 'We are all finding it very difficult to read the tea leaves,' he said.

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.

Sir Stuart  said: "We did not meet the profit target and we did not deserve the bonus. We thought we might have done a bit better. At the end of the day, if you don't earn it, you don't get it."

The retail giant is expected to slash bonuses for around 75,000 staff today despite annual profits topping £1billion for the first time in a decade.

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 21million customers shopping in its store every week, 400,000 ahead of the previous year.

The profits of just over £1billion for the year to March 29 were 4.3 per cent ahead of last year, but came alongside a 1.7 per cent 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.

Sir Stuart  - whose total bonus topped £2.6million last year - offered more gloom over trading prospects. He expected market conditions "to remain difficult for the foreseeable future".

He 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 £900million on its stores this year.

City experts predict the bonus will be a fraction of last year's record £91million payout as the retailer comes to terms with consumer belt-tightening.

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

"We think M&S will only make £1billion if the staff bonus is slashed completely," Pali International's Nick Bubb said.

"A better May so far in food and in clothing won't have offset the terrible April that M&S suffered and at this stage, given the structural and cyclical pressures on the UK business, we expect Stuart Rose to take a glass half-empty view of the world," Mr Bubb added.

Shares in the group reached highs above 750p last year but have fallen by almost half to near the 400p mark as a spending squeeze hammers retailers.

Profits for 2008/09 financial year are also expected to take a further blow - slipping to around £925million as consumers rein in spending amid soaring household bills.

This leaves Sir Stuart facing the first real threat to the turnaround of the business launched after he took over in 2004 to fend off a takeover bid from billionaire Arcadia owner Sir Philip Green.

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 per cent in the first three months of the year, slightly better than most forecasts.