LONDON BRIEFING:Stuart Rose was not in 'green shoots' mode as he predicted another tough year ahead, writes FIONA WALSH.

MARKS & SPENCER’S Sir Stuart Rose invoked the spirit of the Duke of Wellington yesterday as he defended his decision to slash the dividend payout to shareholders.

According to Rose, when Wellington was asked what made a good general, he replied: “Knowing when to retreat and having the balls to do it.” What Wellington actually said was “to know how to retreat and to dare to do it,” but then the executive chairman of Britain’s biggest clothing retailer does like to put his own punchy take on things.

As he unveiled a near 40 per cent slump in profits at the group, the normally chirpy Rose’s take on things felt distinctly downbeat. He wasn’t in “green shoots” mode, he said, as he warned of another tough year.

Along with the slump in profits and slashed dividend, there was news that another of Rose’s potential successors is heading for the exit. Carl Leaver, brought in two years ago to run the group’s international operations, is quitting because, according to M&S, the role “does not fit with his career aspirations”.

This is not the first heir apparent Rose has lost – the former Waitrose boss Steven Esom was hired in a blaze of publicity – with a £500,000 “golden hello” – a couple of years ago only to be fired after little more than a year. That was less than a year ago – and now another reshuffle sees Leaver depart and finance director Ian Dyson move into pole position as potential successor to the 60-year-old Rose, who has said he intends to depart in 2011.

Dyson (47) is to run an “executive change team,” which has been given the task of delivering a step change in how MS services its customers.

The transformation programme that Dyson is to head has been given the slogan “2020 – Doing the Right Thing” while a new advertising motto has also been adopted at M&S: “Quality worth every penny.”

So far, so much jargon. Rose has been at the helm of M&S for five years now and if a step change is still required in serving customer needs, something has surely gone badly wrong.

Shares in the group tumbled yesterday, falling 27.5p to 311.75p, although that was in part because of profit-taking after a recent good run. As much as 20 per cent of value has been lost in the past year. The one-third cut in the dividend, which will save MS £120 million, is a further blow for the group’s army of small shareholders, who hold around a quarter of shares.

Whoever takes the top job at M&S will have their work cut out as the group continues to lose market share in its core womenswear business to rivals such as Next and Debenhams.

Its food operation is also losing ground and has suffered from cash-strapped customers trading down.

M&S has cut its prices, which has had a knock-on effect on margins, but it has failed to establish its value credentials in the same way that many of its high street rivals have, particularly in food.

The group celebrates its 125th anniversary this year and is marking the occasion today by selling two million items, from ties to socks, scarves and beach balls, at just a penny each. The move, which harks back to the store’s beginnings as a penny bazaar in 1884, should bring a boost to sales, although shoppers will be limited to five items each.

Rose did suggest that perhaps the plateau at the bottom had been reached, although he was pretty downbeat in his assessment of the year ahead: “It depends on unemployment and whether anything else comes out of the woodwork.”

To quote the Duke of Wellington, “The whole art of war consists of guessing at what is on the other side of the hill.”

Fiona Walsh writes for the Guardiannewspaper in London