MARKS & Spencer warned of a bleak outlook for sales growth as it reported a decline in half-year revenue, but surprised the market with a higher profit figure.

Revenue dropped by 3.1% to £4.96 billion, reflecting declining sales in both the food and clothing and home divisions.

M&S said it does not expect much improvement in sales in the near future, as it deals with “the growth of online competition and the march of the discounters”.

“Therefore, as we embark on the difficult early stages of transformation, we are expecting little improvement in sales trajectory,” the retailer said.

The company has already announced plans to close around 100 stores in the UK as well as exiting some international markets, but said “significant further change” is required.

Chief executive Steve Rowe said M&S needs to have a “constant churn” of locations to ensure its store portfolio is fit for purpose.

“We should have been doing what retailers do all the time. We need a constant churn to ensure we’ve got the right stores in the right places for our customers. I’m not going to stop at 100 and say job done.”

Clothing and home revenue fell by 2.7% as a result of the strategy to close underperforming stores and reduce the amount of in-store space dedicated to non-food items. Like-for-like sales declined by 1.1%.

Food revenue dipped by just 0.2% overall, but like-for-like sales slipped by 2.9% due to the use of fewer promotions and the timing of Easter.

Underlying pre-tax profits rose 2% to £223.5 million, compared with £219.1 million a year earlier.

Consensus forecasts had pointed to a decline in profits to £203 million.

Rowe said the retailer would be “leaving no stone unturned” in its plans for a radical transformation.