LONDON BRIEFING:AFTER 10 long years of boardroom bust-ups, ill-fated overseas expansion and an abortive takeover assault, Marks Spencer has at last broken through the magical £1 billion profits barrier.

All credit to its chief executive - and, controversially, soon to be chairman - Sir Stuart Rose. He was understandably delighted yesterday to see Britain's biggest clothing retailer rejoin the still exclusive £1 billion plus profits club, albeit by the tiniest of margins - a mere £7 million.

MS store staff have less reason to celebrate, however, as their bonus pool has been more than halved, from £26 million to £12.8 million.

Indeed, had it not been for the slashed staff bonuses, profits at the group would have remained resolutely below the £1 billion mark.

At least Rose is sharing the pain. Along with almost all the senior and head office staff, he will go without a bonus, after receiving a bumper £2.6 million payout the previous year, when profits soared.

As he told reporters yesterday: "If we don't meet the targets, it's tough luck. We did not earn the bonus this year."

Shareholders, too, might be forgiven if their enthusiasm on achieving the profits milestone is somewhat restrained - they have already seen their MS shares lose a quarter of their value this year, and the price slid further yesterday after the figures, dropping below 400p at one stage.

Rose himself knows that any celebrations will be short-lived and that profits at the group will inevitably slide back down again this year, possibly even below the £900 million level.

They could go even lower the following year, depending on the severity of the consumer spending slowdown.

Costs at the group are rising sharply as it presses ahead with its ambitious store opening programme and revamps its existing outlets.

UK operating costs are expected to increase by 7 per cent this year, only partially offset by a £50 million reduction in its cost base, including cuts to its large marketing budget.

Capital spending is being budgeted at a hefty £800 million - £900 million in the current year, which Rose says reflects his confidence in the long-term future of the business. His confidence is not shared by all the group's followers, however.

MS has spent a hefty £1 billion revamping its stores portfolio in the past few years - a programme that is now 70 per cent complete but which is regarded by some analysts as a flop - only to see its underlying UK sales in the final quarter last year fall by 1.7 per cent.

Food was down by 0.5 per cent and general merchandise by 3.1 per cent.

The decline in clothing will have been even greater.

In the four years since he was parachuted in at MS to save the group from Sir Philip Green's unwanted takeover assault, Rose has more than risen to the challenge of restoring the grand old lady of the high street to her former glory. As he put it yesterday, when he arrived at the group, it was "a weak business in a strong market. Now we are a strong business in a weak market."

But, putting his achievements into context, it is worth noting that in 1997, when MS profits reached £1 billion for the first time, profits at Tesco were running at little more than £750 million.

Last month, Tesco reported a record £2.8 billion and is now Britains largest retailer by a very wide margin.

Just how strong MS has become - and, perhaps, just how good Rose really is - will become clear over the course of the next 12 months.

His image has become a tad tarnished in recent months, with the group accused of flouting corporate governance guidelines by allowing him to step up as chairman when Lord Burns leaves.

Eyebrows were also raised when it became known that Rose had taken a stake in a karaoke company, Lucky Voice, owned by former dotcom pioneer Martha Lane Fox.

She is a non-executive director at MS and also on its remuneration committee, which fixes Rose's salary.

Institutional shareholders raised concerns that Rose's investment might jeopardise Lane Fox's independence and Rose later bowed to pressure and sold his shares.

The group, and Rose personally, have also come under fire from one leading City analyst, Tony Shiret at Credit Suisse. Shiret has been highly critical of Rose's strategy at MS, saying the retailer's ranges have been moved too far down-market and that Rose failed to react quickly enough to the consumer spending slowdown.

As he prepares to move up to the post of chairman, Rose has a number of strategies he believes will enable the group to cope with the tough times ahead, including continued international expansion and further development of the online operation.

He is also breaking with tradition by introducing non-MS brand products in the stores for the first time, in an effort to boost sales.

From next month, in a trial in stores in the northeast of England, household name products such as Heinz ketchup and Marmite will appear on the shelves, in an effort persuade customers to do more of their weekly shop at MS.

Fiona Walsh writes for the Guardian newspaper in London