M&S slashes dividend as profits tumble

Marks & Spencer's (M&S) share price slumped nearly 5 per cent this morning, after the retailer unveiled that annual profits were down by £400m and that the Group would be slashing its dividend to 15 pence. Retail stockbroker, The Share Centre advises M&S shareholders to sell citing better opportunities in the retail sector.

Commenting on M&S's results, Nick Raynor, investment adviser at The Share Centre, said: "The decision to cut the annual dividend from 22.5 pence to 15 pence is a blow for M&S shareholders, who currently hold about a quarter of the retailer's shares. Although this is the first time M&S has cut its dividend in the last eight years, the Group is obviously not confident about being able to maintain it going forward.

"It appears M&S has had no choice but to drastically slash its dividend by a third, given the economic climate. The retailer has suffered as a result of the recession, as consumers continue to search for cheaper clothing and groceries. The dividend cut is just one of many efforts to help streamline the business and will save M&S approximately £120m. M&S has already announced 1,250 job losses and has even asked its "face" Mylene Klass to take a pay cut.

"With difficult trading conditions set to continue and a reduction in the dividend, we are advising M&S shareholders to sell. Although we are not big fans of the retail sector at present, those wanting exposure could plump for Tesco whose international presence, cheaper prices and growing dividend policy could help recession-proof the company and provide better value for shareholders."