Marks & Spencer, Britain's largest clothing retailer, slashed its dividend and announced a surprise board shake-up as it reported better-than-expected pretax profits, down to £418 million sterling (€690.7 million) from £536 million. The giant stores grouping, once considered the doyen of British retailing announced the departure from the board of two veteran directors.

However, it also reported news of an upswing in sales. Britain, which accounts for nearly three-quarters of group sales, saw like-for-like figures for the eight weeks to May 20th improve by 2.1 per cent.

Observers believe that conditions on the high street have improved recently, citing warmer weather and a favourable consumer response to competitive pricing. The general manager of Marks & Spencer Ireland, Mr Steve Costello, said all four outlets in the Republic had shown significant increases in sales, but would not give any figures. Business had performed on target and there had been above-target growth since January, he said.

Mr Costello announced that profit-sharing was being introduced for Irish staff. "We believe we are the first Irish retailer to do so," he said. "What this means is today more than 1,000 members of staff have become M&S shareholders for the first time."

However, the company announced a 37 per cent cut in the full-year dividend to 9p sterling, from 14.4p last year, a bitter pill for the company's large base of private investors to swallow. The dividend cover is now just one times earnings. Before Marks & Spencer hit trouble over three years ago, it traditionally had an average dividend cover of more than two times.

The dividend cut had been widely expected and gives M&S upwards of £140 million sterling to plough into the business. The full-year results for the year to March 31st last saw turnover flat at £8.2 billion (€13.5 billion).