Marks & Spencer has reported a sharp fall in annual profits as it revealed a deterioration in clothing sales and extensive store closure costs.

Pretax profits at the retail giant slumped 62% to £66.8m after a £514.1m bill for restructuring that included £321m to pay for the first phase of its store closure plan. One in three of its core clothing and home stores is scheduled to disappear from the high street within four years and the group warned that a further £150m of closure costs would follow.

Despite the slump in profits, M&S chairman Archie Norman said it was a “historic day” for the retailer as the new management team set out a clear plan to revive the business. “We are looking for people to recognise that we are building a very strong management team who are going to give this a bloody good shot,” said Norman, who is best known for reviving the fortunes of Asda and ITV. “I’m convinced this is a turning point in our history.”

The chief executive, Steve Rowe, said major structural changes were affecting the retailer as sales transferred to the internet and no-frills chains such as Primark, Aldi and Lidl. On Tuesday the retailer said it would close 100 of its 300 high-street stores, which sell clothing, homewares and food, by 2022.

Rowe said one of the biggest tasks was to change the company’s culture as M&S was a “top-heavy business that was inward looking and too ‘corporate’”. “There are too many layers, too many committees, and it’s too corporate,” he said.

M&S expects a third of its clothing and homewares business to move online over the next five years. But Rowe admitted neither the website, which had a £150m revamp four years ago, or the hi-tech warehouse built in Castle Donington, Leicestershire, to support it were up to the job and more investment was now required.

“Our online capability is behind the best of our competitors and our website is too slow,” said Rowe, admitting that product pages took too long to load and the search function was not good enough. “Our fulfilment centre at Castle Donington has struggled to cope with peak demand and some of our systems are dated.”

M&S said clothing sales in stores that have been open more than one year tumbled 3.4% in the fourth quarter as trading was hit by the “beast from the east” cold snap. That compared with a decline of 2.3% in the previous period. Total clothing sales were down 1.4% at £3.7bn in the year to 31 March, and analysts warned that the retailer is at risk of losing its market leadership to Primark in 2018.

Sales in M&S’s food halls also went backwards, with underlying sales down 0.6% in the three months to 31 March as it was outflanked in the competitive convenience store market. Rowe said M&S’s food halls needed to offer better value for money and to attract more families. To that end, it plans to develop a new type of store that would better appeal to this group of shopper.

Rowe, who has been in charge for two years, did not rule out additional store closures. “This is a catch-up programme. We have got too many legacy stores and historically have not closed stores fast enough. We need to make sure we’ve got an estate that is fit for the future.”

On an underlying basis, profits were down 5.4% at £580.9m. M&S shares were the best performer on the FTSE 100 on Tuesday, closing up more than 5% at 307p, suggesting investors believed that the management was finally getting to grips with the company’s problems.

Despite the rally, M&S’s declining fortunes mean that its place in the prestigious FTSE 100 is at risk in next week’s reshuffle.

Norman was unconcerned about demotion to the FTSE 250, a fate that befell ITV before he took charge. “Right now what you measure [at M&S] is the pace of change,” he said. “The financial results will follow.”

Russ Mould, a director at investment platform AJ Bell, said maintaining the dividend would encourage investors to hang on to their shares. “Rowe admits that it is going to be a long haul, as the goal now is to deliver sustainable, profitable growth ‘within three to five years’,” he said. “Investors now have to decide whether that’s too long to be left waiting at the checkout.”