Marks & Spencer has said that finding suitable sites for new stores in the Republic is "exceptionally difficult".

The company has been attempting to expand into Limerick and Galway for the last two years, but has yet to find suitable sites for new stores, the company's general manager for Ireland, Mr Stephen Costello, said yesterday.

Nevertheless, the company will have increased its presence in the Republic's retail market by 30 per cent by the end of the year.

Mr Costello said with the booming economy and the increased competition in the retail market, suitable sites are being keenly fought over by several large companies. He said the company will continue its search and does not see the acquisition of another retailer as an alternative way to expand.

Mr Costello said the company will be creating 100,000 square feet of new retailing space the by autumn. This will be done by adding 20,000 square feet to its store on Mary Street in Dublin and opening its 80,000 square foot store in Liffey Valley, Lucan.

Mr Costello said the Liffey development, as its first "edge of city location is strategically important to the development of our overall business in the Dublin area". The company is understood to be interested in acquiring space for a similar development on the south side of the city, with an expanded Stillorgan Shopping Centre one of the most likely targets, according to sources.

By the end of the year the company will have more than 300,000 square feet of trading space in the Republic, an increase of 30 per cent on the year before. The expansion programme will see staff numbers rise to 1,250 at the end of this year, which is a 40 per cent increase on the year before.

Mr Costello said the above inflation salary increase of 4 per cent - plus a bonus of 1.25 per cent - which the company is giving to its employees in Britain will not apply to Irish workers. "We operate within the Partnership 2000 programme and our workers have a package which exceeds any competitor," he said.

Last year represented the first full trading period for the company's Grafton Street store in Dublin which, Mr Costello said, had "outperformed even our own expectations".

In London yesterday, the retailing combine indicated that strong growth in profits and earnings may be coming to an end. After Reporting 6.1 per cent growth in 1997-98 profits to £1.17 billion sterling, the chairman, Sir Richard Greenbury, warned that current year profits may be lower. Blame for the setback is placed on the anticipated £35 million impact of strong sterling on translation of profits of overseas operations, including Irish stores; lower UK profits hit by £85 million revenue costs of £1.2 billion investment programmes; and the less benign British domestic environment.

Despite the slowdown in growth, total dividend payments are up 10 per cent at 14.3p. Shares in M&S slipped 4p to 576p.