The appointment was annnounced after Sir Richard Greenbury, M&S boss, relinquished the role of chief executive but will continue as non-executive chairman until the annual general meeting in 2000.

Peter Salsbury, managing director of general merchandise, will step into the breach next February.

But investors showed their disappointment at Mr Salsbury's appointment as shares slipped almost 6% to 421p.

Deputy 'disappointed'

Deputy chairman Keith Oates, who was credited with building the company's successful financial services, is to retire early in the new year.

He said he was "disappointed to be leaving".

Sir Richard said Peter Salsbury "was an extremely talented retailer and the ideal man to lead Marks & Spencer into the 21st century.

Mr Salsbury said: "This is a company where commitment runs in our veins and I couldn't ask for a better team to set about the tasks and challenges ahead.

"This is clearly a difficult environment both in the UK and overseas, but the company has the resource and management skills to come through this period successfully."

Will to Power

The leadership decision follows one of the most crucial board meetings in the company's 114-year history on Wednesday.

BBC's Peter Gould on the turmoil at the historical store

M&S was thrown into turmoil after a 23% drop in half-year profits and disappointing sales in the run up to Christmas.

The retailer's headquarters have been the scene for a escalating boardroom battle

The ailing performance led to a bitter boardroom battle as leading M&S directors vied to takeover control of the group.

M&S came under intense pressure from its investors to find a successor as the uncertainty surrounding the group hit its share price.

Work cut out

M&S is under attack from UK textile producers about plans to buy more of its clothes from abroad.

Murray Steele: Succession battle has exacerbated downturn in results

M&S claims it has been forced into the move to save costs, but the plans have caused an uproar among textile trade unions and could lead to thousands of UK job losses.

M&S has also had to put its overseas expansion plans on hold due to the downturn in the world economy.