Although full-year profits fell from pounds 1.1bn to pounds 655m, the figure was above the City's worst expectations after the company's profits warning in January.
Investor sentiment was further helped by a current trading statement that showed that although sales are still falling, the rate of decline has slowed.
The shares closed 20p higher at 399p as the City also gave a cautious welcome to the measures announced by the new chief executive, Peter Salsbury, to address the problems. "It's very early days, but there are potential signs of recovery. The worst may be over," said Ashley Thomas at SG Securities.
Mr Salsbury, who won the bitter boardroom battle to succeed Sir Richard Greenbury earlier this year, described the full-year profit collapse as "unacceptable".
But investors were cheered by a slight rise in the dividend from 14.3p to 14.4p, although the payout is no longer covered by earnings.
Finance director Robert Colvill also held out the prospect of a possible return of funds to shareholders via a share buyback, or a sale-and-leaseback deal to take advantage of M&S's relatively ungeared balance sheet.
The results showed just how badly the business has been affected by buying mistakes, overexpansion and a perception of high prices. Underlying sales, stripping out new selling space, were down by 4 per cent on the year, including a 7.4 per cent fall in 11 weeks to March.
In the main UK business, profits halved from pounds 924m to pounds 454m. Europe slumped to a pounds 64m loss after heavy exceptional changes, the impact of the strong pound and poor performances in France, Germany and Spain. Profits in the US fell, although the company said it had no plans to sell its Brooks Brother Clothing chain.
In current trading , sales are down by 7.2 per cent in the four weeks to April but by 2.6 per cent in the two weeks to 8 May, showing some recovery.
M&S has appointed Whitehead Mann, the City headhunters, to seek a replacement for Sir Richard Greenbury as chairman, although this is expected to be "a long process" according to one director.An announcement on a new marketing director is expected "within weeks".
Retail analysts were generally supportive of M&S's plans to tackle its problems, but said recovery would be a long haul.
However, Rowan Morgan at Teather & Greenwood said: "We remain negative on the shares and need to see more evidence that the business is back on track." Mr Morgan revised his current-year profit forecasts to pounds 670m, although other analysts have pencilled in figures as high as pounds 750m.Reuse content