SHARES in Marks & Spencer surged more than five per cent after the struggling retailer posted a 5.4 per cent fall in underlying profits to £580.9 million, ahead of analysts’ forecasts.

It was the second annual profits fall in a row to be reported by the high street giant, which this week announced the closure of 100 stores as it continues to grapple with tough trading conditions and the steady drift to online retailing. The decision has put nearly 1,000 jobs at risk at M&S, which on Tuesday named its stores in East Kilbride and Falkirk among the latest 14 it has confirmed will shut.

Shares in the one-time high street bellwether rebounded as adjusted profits came in higher than expectations. However, taking into accounting £514.1m of adjustments, including costs of £321.1m relating to its UK store closure programme, profits plunged by 62.1% to £66.8m. The company said the cash cost of its transformation plans are in line with plan.

M&S’s falling share price has led to speculation it could lose its place in the FTSE 100. While shares recovered yesterday, last night’s closing price of 306.9p was well adrift of the 387.8p it hit a year ago. The next FTSE reshuffle will be unveiled on May 30.

M&S, which began life as a penny bazaar in Leeds in 1884, has been facing challenges on a variety of fronts. It is taking steps to boost its own online capacity and performance to meet the competition posed by dedicated online retailers such as Ocado and ASOS, while dealing with a costly store estate.

It has faced rising costs as a result of the weaker pound pushing up import costs since the Brexit vote. And for years it has toiled to shore up clothing sales as it has lost ground to rival fashion retailers, which have been better equipped to attract younger consumers.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “M&S is simply struggling to make progress in a world where a compelling mobile app is every bit as important as a presence on the high street, and considerably less expensive. In the last year traditional retailers like Marks have faced a perfect storm of rising costs, a constrained consumer, and the relentless growth of online competition. That’s reflected in the fact M&S is one of the most shorted stocks in the market, with 12% of the company’s shares out on loan to those who have bet against it.”

Chief executive Steve Rowe conceded yesterday that M&S has a “number of structural issues to address” as he bids to transform the retailer.

It reported that food sales, which M&S has depended on in recent years to offset declining clothing and home sales, dipped by 0.3% on a like-for-like basis last year.

The firm admitted that its “every day performance was poor” in food over the period, citing intense competition as well as its declining ability to be competitive in core ranges.

Food revenue grew by 3.9% as the company opened 62 new Simply Food stores during the year.

Like-for-like clothing and home sales dropped by 1.9%. M&S said sales fell in the second half amid a challenging market and unseasonable weather conditions. It also cited the effect of the removal of two clearance sales, noting that it had put eight per cent less stock into sale over the year.

Mr Rowe said: “At our half year results in November I outlined the need for accelerated change at M&S. The first phase of our transformation plan, restoring the basics, is now well under way and the actions taken have increased the velocity of change running through our business. These changes come with short term costs which are reflected in today’s results.”

Mr Rowe, an M&S veteran of more than 25 years, added: “There are a number of structural issues to address and we are taking steps towards fixing these.

“The new organisation will largely be in place by July and the team is now tackling transforming our culture to make M&S a faster, lower cost, more commercial, more digital business.”