MARKS & Spencer has seen £735 million wiped off its value after announcing that profits would be hit by a strategy to overhaul its clothing and home division, which was announced in the wake of an “unsatisfactory” performance.

Following a “forensic” review of the business since he assumed the chief executive position in April, Steve Rowe announced a plan to recover and grow clothing and home.

He added that the group’s international business and its UK store estate were among other areas that would be reviewed, with an update expected in the autumn.

“We expect the combination of difficult trading conditions, as well as our decision to invest in price and reduce our promotional activity, to have an adverse impact on profit in the short term,” said Mr Rowe.

Overall pre-tax profits at the retailer dropped by 18.5 per cent to £489m for the 53 weeks to April 2. Revenue grew 2.4 per cent to £10.6 billion. Underlying profits did grow, by 4.3 per cent, but this was hit by a £200m provision for pension reform and PPI misselling.

Mr Rowe arrived at M&S as a 15-year-old, and aside from a four year stint at Top Shop, he has been with M&S ever since, working in every area of the business.

He became chief executive last month following the departure of Marc Bolland, with a remit to turn around the clothing division.

Part of this strategy involves lowering prices and reducing the number of promotions.

M&S, which operates 86 stores in Scotland, said it would also enhance its customer experience with sharper ranges, better availability and investment in store staffing.

Mr Rowe said: “This, together with continued momentum in food, will provide us with a solid base from which to build a long-term sustainable business,” he said.

As the company continues to grapple with its position in fashion retail, its food business continued to impress, growing sales by 3.6 per cent.

The company said the acceleration of the growth of its Simply Food brand was key to its strategy. It said stores that have opened this year – including four in Scotland – are already delivering ahead of expectations and there were further requirements to expand its estate.

Having already committed to opening 250 new Simply Food stores by March 2017, M&S said it planned to open around 100 stores in each of the following two financial years.

Steve Clayton, head of equity research at investment broker Hargreaves Lansdown, said that the theme of strong growth in food but poor performance in clothing and home has been an “ever-present scratched record” for some years now, and recognised that Mr Rowe was determined to nudge performance on to the next track.

“M&S has 8.5 per cent market share, so it is still the UK’s largest clothing retailer by value – and with 32 million customers, there are plenty of relationships to strengthen,” he said. “But so far, there is little we can see in the strategic review that hasn’t been tried before.”

The company proposed a final dividend of 11.9p resulting in a total dividend of 18.7p, up 3.9 per cent on last year. There is also a special dividend of 4.6p per share for the first half of the 2016/17 year.