Marks & Spencer has reported a fall in full-year profit but said strategic progress is being made and that remodelled stores are outperforming the rest of its estate.

The retailer posted underlying profit before tax of £705.9m, down from £714.3m the previous year. Pre-tax profit fell from £780.6m to £658m.

Group sales rose 2% to £9.9bn. At the core UK business, Marks & Spencer generated a 0.3% uplift in-for-likes. Food like-for-likes rose 2.1% and general merchandise fell 1.8%.

Marks & Spencer chief executive Marc Bolland said the business had “performed well in a challenging environment” but he scaled back sales growth targets set in 2010, when it was hoped to increase revenues by between £1.5bn and £2.5bn over three years. The retailer now expects to increase sales by between £1.1bn and £1.7bn.

Bolland said: “Whilst the economic environment has deteriorated since we first set out our strategic plans, we have made significant progress.

“Our UK pilot stores are delivering good results, which has given us the confidence to launch phase two of the programme.

“We are well on track to become a truly international multichannel retailer. By the end of this year we will be transacting from 10 websites worldwide and opening around 100 international stores per year.”

Bolland oversaw the launch of 15 remodelled shops last autumn – the “pilot stores” – the first phase of which which was designed to make them easier to shop, more inspiring and showcases for exclusive food lines.

He reported that in their first six months the shops had traded 2.5% ahead of a control group, reciording an internal rate of return of 13%, and there had been an improvement in brand perception.

So far changes have been made to 92 shops, including 56 Simply Food stores – about 15% of M&S’s estate.

Bolland said: “From today we are rolling out the second phase of the new format which includes new beauty, footwear and home schemes.”