Top clothing retailer Marks & Spencer Group Plc posted a 19 per cent fall in profit and said it had lost market share, while question marks still surround current trading performance.
Pretax profit at the tarnished high-street icon dropped to £618.5 million, marginally ahead of analysts' mean forecast of 616 million as same-store sales slid 5.1 per cent.
But the share rallied on relief that there was no new warning on profits, pushing 1.5 per cent higher to stand at 342 pence by 0950 GMT.
Chief Executive Stuart Rose, brought in a year ago to lead the defence against a hostile 400-pence-per-share indicated bid from billionaire entrepreneur Philip Green, said the performance was disappointing, although progress had been made.
"The outlook remains challenging, with tough economic and competitive conditions expected to continue," Mr Rose said in a statement, but did not update the market on trading conditions since the April 2 end of its financial year.
The absence of a second profit warning this year was welcomed by a market that had been bracing for bad news amid flagging consumer confidence on Britain's high streets.
Rivals such as Next Plc and New Look have all reported sagging consumer confidence, and some reports have suggested a decline in clothing sales could be accelerating.
"We would imagine that any relief today on the absence of bad news may be counterbalanced by nervousness over the first quarter (trading) statement in July," brokers Cazenove said.
M&S, which will report on first-quarter sales on July 13, later restated its earnings to reflect the adoption of IFRS accounting standards with effect from April next year.
Under the new international standard, pretax profit would have been £22.5 million lower, and adjusted earnings per share, which were stated at 21.9 pence under the existing standard, would have been 0.9 pence lower.
M&S said its all-important clothing market share in the UK had fallen half a percentage point to 10.5 per cent, though in-store footfall and clothing volumes were both up on the year.
"Our job now is to get the conversion rate (from footfall to sales ratio) up. We have to ask, 'Are there enough things to excite you?' We didn't get it right last year; our research on the in-store environment was frankly a bit disappointing," Mr Rose told reporters on a conference call.
In value terms, total clothing sales fell 3.1 per cent, while the same-store clothing sales decline was around five per cent.
Food sales were up 2.4 per cent on the previous year, but the like-for-like performance dropped 2.6 per cent as supermarket groups began to compete more effectively with M&S's high-quality grocery ranges. Mr Rose has been working to slash inventories, cut mark-downs, reduce the over-proliferation of M&S brands and reduce costs as he and a new management team attempt a thorough overhaul of the 121-year-old company.
A £1.3 billion stock overhang inherited from the previous management has been eliminated, Mr Rose said, and the company hopes to reduce the impact of price markdowns by about £100 million this year.
Costs will be cut in excess of £250 million, with £320 million in savings to be delivered in 2006/7. Added to this, the company will squeeze clothing suppliers to the tune of £140 million in the current year.
Last week, M&S appointed Terry Burns, chairman of Abbey National, to succeed Paul Myners as M&S chairman with effect from July 2006.
Since it downgraded its profit forecast in January, trading performance at the once mighty M&S has continued to weaken, with same-store sales falling 4.9 per cent in the fourth quarter of last year, the sixth consecutive period of declining revenue.
A poll of 19 analysts by Reuters Estimates puts the consensus pretax profit forecast for the 2005/6 financial year at £683 million.
The final dividend was set at 7.5 pence per share, an increase of 5.6 per cent on the year-ago period.
M&S said it would trial its "Simply Food" concepts in eight fuel stations run by oil giant BP this autumn.
The trial stores will offer ranges including fresh food, ready meals, flowers and basic groceries as the company seeks new markets to counteract flagging sales at its established high-street outlets.