M&S profit hits 1 billion pounds

LONDON (Reuters) - Marks and Spencer's (MKS.L) annual profits hit 1 billion pounds but the retailer cut its staff bonus, having failed to meet internal targets, and warned a slowdown in consumer spending could run until autumn 2009.

Britain's largest clothing retailer said on Tuesday adjusted pretax profits rose 4.3 percent to 1.007 billion pounds, slightly higher than some analysts' expectations due to a lower-than-expected interest charge.

The shares reversed an early relief rally to trade down 2.5 percent at 408.25 pence by 10:10 a.m., underperforming the DJ Stoxx index of European retailers .SXRP on market expectations that a slowdown in consumer spending will worsen.

Chief Executive Stuart Rose said he expected market conditions to remain difficult until "summer or autumn 2009" and indicated profit before tax was likely to fall this year.

"As a retailer we would welcome a reduction in interest rates and we would welcome the government to give more confidence to consumers," Rose said.

M&S, a bellwether for the state of consumer spending, had failed to meet undisclosed internal targets and Rose said he would forgo a bonus after a 2.6 million pound payout last year, as would other top management.

Instead, the company would make a one-off discretionary payment of 16.8 million pounds to be shared by both store staff and employees in its well-performing international and online business units.

Credit Suisse analyst Tony Shiret said he believed Marks and Spencer's annual profits could fall to 800 million pounds to 900 million pounds this financial year, but the worsening consumer market that could still make that hard to achieve.

RESILIENT