Flagging high-street giant Marks & Spencer has warned of disappointing annual profits after poor Christmas sales forced the company to make massive end-of-season markdowns.

The company, which spent a large part of 2003 embroiled in a takeover battle with entrepreneur Philip Green, said it expects profit before tax and exceptional items will be in the range of £600-625m for the year ending March 2005.

Analysts had previously forecast profit in the region of £675m, according to a spokesperson for the company.

Same-store sales dropped 5.6 per cent in the six-week period ended 3 January, with clothing sales plummeting 4.9 per cent.

The company said in a trading update that although there had been "heightened levels of promotional activity" over Christmas, a considerably larger amount of stock had been reduced at the end of the season compared with last year.

Chief executive Stuart Rose, who joined the company in May, has so far failed in attempts to push up the company's sales and bring it back into public favour.