Marks & Spencer has reported an expected 39.9% slump in full-year pre-tax profits and slashed its dividend by a third, amid what the retailer called a “very challenging economic environment”.

Like-for-like food sales dropped by 5% in the year to 28 March, with overall like-for-like sales down 5.9%.

Food sales dropped from £8.3bn to £8.2bn despite M&S reducing prices on 10% of its food range during the year in a bid to rebuild its value credentials.

Total group sales crept up 0.4% to £9.1bn, with pre-tax profits down 39.9% to £706.2m.

Executive chairman Sir Stuart Rose said the company would continue to improve its value, innovation and store standards over the coming 12 months, as well as continue with a branded food trial, which is currently being tested in 22 stores in the south of England.

“During the year we acted decisively to meet the challenges of the economic downturn, responding quickly to the changing needs of our customers, managing costs tightly and protecting our balance sheet,” Rose said.

“We believe this, together with our investment programme, is creating stronger foundations for long-term growth.”