Profit fall to hit M&S staff bonuses

Retailer's chief executive Marc Bolland is expected to unveil a flat dividend after sales slow

Marks & Spencer is expected to slash its bonus for nearly 80,000 staff after it posts its first fall in annual profits for three years this week.

The disappointing figures and and expected flat dividend will pile the pressure on Marc Bolland, the chief executive, who could pocket a combined pay package of up to £6m this year.

Analysts say that current trading at the high street stalwart is in "a hole" – partly due to the recent almost incessant rain – and that M&S is currently tracking behind its targets of increasing sales by as much as a quarter to up to £12.5bn by 2014.

The City will also scrutinise any comments made by Mr Bolland, who joined M&S in May 2010, for guidance on the outlook for consumer spending.

The retailer, which has more than 700 UK stores, is forecast to deliver pre-tax profits down by 3 per cent to £694m for the year to 31 March, dragged down by lacklustre clothing sales.

John Stevenson, an analyst at Peel Hunt, said: "Marks & Spencer hit its numbers for its last financial year by delivering about £100m of cost savings."

The fall in profits could result in a significantly reduced bonus for its 78,000 UK staff. While M&S will not say anything on remuneration until its annual report in June, there are fears that that the £53m bonus pot shared by employees last year may be more than halved.

Mr Bolland, who had a salary of £975,000 in the year to March 2011, is expected to be handed £1m of shares for the year just ended, which are to compensate him for rewards accrued at his former employer Morrisons.

Under the terms of his joining M&S, the Dutchman could also pocket shares of up to £3.9m for a performance-related scheme, based on earning per share growth above the rate of inflation over the three years to the end of March 2012. However, partly due to the stubbornly high inflation, Mr Bolland is not expected to receive this maximum payout.

M&S, which serves 21 million customers a week, is expected to maintain its dividend at 17p a share, although some analysts have pencilled in a slight rise.

Mr Bolland may partly blame the UK's first double-dip recession since the 1970s for the fall in profits, but City analysts believe M&S will struggle to increase its sales from £9.7bn to £12.5bn over the three years to March 2014.

While the UK is seen as the main culprit for this under performance, Bolland could signal a bigger contribution from online and international markets – in countries, such as India and China – than he first set out 18 months ago.

Mr Bolland is likely to admit that the wettest April on record has taken its toll on sales of summer clothing. Andrew Hughes, an analyst at UBS, said: "We assume that current trading will be in a hole."