THE axe fell on Marks & Spencer's flagship Lifestore in Gateshead yesterday as the troubled retailer unveiled a masterplan to fend off a takeover bid by tycoon Philip Green.

Lifestore, which opened in February, will close by the end of January next year.

The homewares business was developed by former Selfridges boss Vittorio Radice and formed part of a push by M&S into a market worth £20bn a year.

The trial store opened in Gateshead, with further branches planned for Lakeside, West Thurrock, and Kingston-upon-Thames, but following disappointing sales, the trial has been abandoned.

New chief executive Stuart Rose said M&S as a group had become too complicated, with stores cluttered with too many different lines.

M&S will sell its financial services division to help fund a £2.3bn payout to shareholders, while generating annual savings of £320m within three years.

Property has been revalued at £3.6bn and the group will acquire the per una fashion brand as it seeks to revive like-for-like sales, which fell by 2.8 per cent in the 14 weeks to July 10.

Mr Rose, who took over in May in response to the emergence of bid interest from Mr Green, said the company had lost focus and allowed competitors to encroach on its heartland.

Analysts were last night divided about whether Mr Rose had done enough to fend off Mr Green, who has offered 400p a share.

The proposed takeover was also dealt a blow by news that Mr Green may have to pay up to £785m a year into the M&S pensions fund if his bid succeeds.

As part of his update yesterday, Mr Rose pledged to deliver value significantly in excess of 400p a share.

He said: "Marks & Spencer is a great business with a strong brand.

"Our aim is to give Marks & Spencer back to our customers."

M&S has struck a deal with HSBC bank to sell its financial services operation for £762m, but will remain a partner and take a 50 per cent share of future profits.

Proceeds from the disposal of M&S Money, which has 2.7 million cardholders and total lending of £2.5bn, will form part of the £2.3bn returned to shareholders.

M&S announced that 650 staff would lose their jobs at its head office in Paddington, London, and deals with suppliers have been renegotiated to cut costs.

In the food halls, 500 product lines have been eliminated and Mr Rose said he would reduce the number of ranges being marked down for sale.