M&S announced 1,200 job cuts and 27 store closures in January
UK retailer Marks and Spencer has cut its dividend by a third after reporting a fall in annual profits.
The 125-year-old retailer said it had decided to rebase its dividend payment to 15p a share from the previous level of 22.5p.
Annual pre-tax profits fell to £706m ($1.1bn) from £1.1bn the year before. Total sales rose 0.4% to £9.1bn.
In January, M&S announced 1,200 job cuts and plans to close 27 stores in a move to restructure its business.
M&S said it would rebase its dividend payment to 15p a share by cutting the 2008/09 final dividend by 33% to 9.5p a share, and then reducing the 2009/10 interim dividend to 5.5p a share.
The cut in the final dividend means the total dividend payment for 2008/09 was 17.8p a share, compared with 22.5p in 2007/08.
The retailer described its dividend cut as a "tough but necessary" decision.
Shares in the retailer ended the day down 8.1% at 311.75p.
M&S chairman Sir Stuart Rose said in the statement that trading for the first seven weeks of the fiscal year had been "broadly in line" with the final three months of last year.
The chain said in March that like-for-like sales in the UK, which strip out the impact of store openings and closures, were down 4.2% for the 13 weeks to 28 March.
"We remain cautious about the outlook for the remainder of the year," Sir Stuart said.
Like-for-like UK sales fell 5.9% over the year, with general merchandise - which includes clothes - down 6.9% and food sales 5% lower.
"The continuing retrenchment of the consumer towards cheaper products and the increasing agility of the competition are playing away from M&S," said Richard Hunter, Head of UK equities at Hargreaves Lansdown.
After announcing plans to close 25 of its Simply Food stores in January, M&S said it had managed to halt the rate of decline of its market share in UK supermarket food and drink sales, which fell to 3.9% from 4.3% during the year.
"Whilst our profit was down on the previous year, we took decisive action to respond to the changing needs of our customers and to mitigate the impact of the economic downturn," the company said.
M&S's profits, adjusted for the personnel restructuring charges and store closures, fell to £604m from £1.01bn, just slightly under analysts' expectations.
Total sales fell 1.7% in the UK, but rose 26% in its stores internationally, including China and Eastern Europe.
M&S opened 33 new stores outside the UK, taking its total to 296. The company is planning to open 50 new stores across Europe, Middle East and India this year.
It is running 15 stores in India, in partnership with Indian conglomerate Reliance, and plans to open 10 to 15 more over the next two years.