M&S posts nine-year profit high

Unveiling profits of £965.2 million, an increase of 28.5%, chief executive Stuart Rose said: "The business is now in a pretty healthy shape. We need to now move into grow mode."

Mr Rose said continued expansion would help drive growth ahead over the next two to three years as the company moves to extend its presence in retail parks and out-of-town locations, as well as overseas in Europe and India.

He said he was looking to recruit 10,000 staff in the UK over the next three years. It currently has 72,000 workers in the UK.

Analysts expect the company to break the £1 billion profits barrier in the current financial year, the first time this has happened since 1998. However, shares in the group slipped 4% as Mr Rose issued a cautionary warning regarding the year ahead.

"We expect the retail environment to become more challenging: competition remains intense, and pressure on consumer spending as a result of interest rate rises will also increase," he said.

However, William Hobbs, equity analyst at Barclays Wealth, said he believed that Marks & Spencer was "better insulated than most to weather any consumer spending slowdown".

Sales jumped more than 10% to a record £8.6 billion as all of M&S's divisions flourished over the period. The bumper results will see staff pocket a £91 million windfall, including £26 million for store customer assistants, in recognition of their contribution to the recovery of the group.

Shop staff should get around £500 each, with the payouts for other staff dependent on position.

Clearer pricing and fresh designs helped womenswear increase its share of the market - it now holds an 11.1% share - while high profile advertising campaigns saw shoppers rush to snap up items such as limited collection red dresses at £49.50. The dress, modelled by Myleene Klass in the latest series of TV ads, sold out within two weeks - a far cry from the dreary and uninspiring clothing ranges M&S became known for in the late 1990s.