The high-street giant Marks & Spencer is likely to announce it has made profits of more than £1 billion – last seen a decade ago – when it reports annual results this week. However, the board directors, led by Sir Stuart Rose, will miss their bonus.

Rose received a cash bonus of £1m last year in addition to deferred shares and his basic salary of £975,000. However, this year the bonus will be missed because of tougher financial performance targets that had been set by the company.

His 56,000 staff will also be affected. Last year they received a payout equivalent to 10% of their salary. This time it could be less than 4%. The total bonus pot is expected to shrink from £91m to less than £25m.

The reduced payouts will hit staff morale, particularly after the bumper profits produced by the company for the year to March.

It contrasts sharply with the bonus announcement in March from rival retailer John Lewis Partnership. Nearly 70,000 staff members at the John Lewis department store and Waitrose supermarket chains have shared a bonus payout of more than £180m – equal to 20% of their salaries – after the group made record profits.

While Rose will receive plaudits for passing the £1 billion mark, a level last seen in 1998 when the company was run by Sir Richard Greenbury, he will reiterate to investors that current trading is tough. The high street, particularly clothing sales, has been hit hard by the credit crunch. Consumers have reined back spending on all items and analysts are expecting M&S profits to fall by as much as £200m this year.

In January, M&S sent shock waves through the retail sector when it announced its first fall in sales for two-and-a-half years and warned that trading could remain difficult into 2009. Rose said conditions were the worst he had seen for a decade as shoppers faced rising household costs.

However, women over 50 remain M&S’s biggest customers, and their spending power has not been affected as much, particularly for the more expensive clothing items. To drive growth, Rose is expected to focus his strategy on continuing overseas expansion and boosting more online sales though the M&S Direct internet business. Rose has told investors that international expansion should smooth the group’s earnings.

Analysts say Rose will use these profit figures to show he has the right team in place to deliver future growth. He has recently faced heavy criticism for proposing to elevate himself to chairman, to succeed Lord Burns, without adequate consultation with investors. His promotion flies in the face of good corporate governance, but Rose has refused to back down.

To placate investors, M&S has agreed to recruit a senior non-executive director in addition to promoting Sir David Michels to deputy chairman.

Shares in M&S have fallen over the past 12 months from a high of 756p to 415p on Friday, valuing the company at £6.6 billion. The fall is partly due to analysts cutting the value of the retailer’s property estate and partly to the trading outlook.

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