Retail tycoon Philip Green yesterday resisted the temptation to pay himself a dividend from his Bhs empire, after sales and profits went into reverse.

Operating profits of #105.1 million banked during the 53 weeks to April 2 were kept within the business, after Mr Green declined to repeat the #199.5 million dividend payout of last year.

His decision followed a tough year for Bhs, with like-for-like sales falling three per cent and operating profits declining at nearly twice this rate.

However, Mr Green remained upbeat about the strength of the business and said the performance was credible in the current retail climate.

Sales totalled #889.2 million during the year, and Mr Green said revenues at Bhs since then were four per cent lower than the previous 12 months.

"The middle market continues to be challenging," said Mr Green, who also owns the Arcadia group of companies that includes high street stalwarts like Top Shop and Dorothy Perkins.

The results were unveiled just 24 hours after a positive trading update from rival retailer Marks & Spencer, which Mr Green tried to buy in a #9.1 billion takeover campaign last summer.

M&S said like-for-like sales increased by 1.3 per cent in the 12 weeks to October 1, although this followed a decline of 5.4 per cent in the previous quarter.

Despite the difficult high street conditions, Mr Green snapped up the loss-making UK business Etam in April for a price thought to be about #10 million.

The deal added the Tammy brand for teenage girls, which the retail entrepreneur has introduced to Bhs stores.

Mr Green said: "Bhs has a very loyal customer base that looks for a premium value offer, which we continually work to deliver.

"This has recently been demonstrated by the very positive response to the re-launch of the Tammy brand."

In addition to the Etam business in the UK, Mr Green also acquired ten sites from administrators of the collapsed Allders chain of department stores in February.

Bhs has spent #20 million on sprucing up its stores, and a dozen new branches have opened in towns including Guildford, Nuneaton and Llanelli.

"A further seven stores are planned to open within the next six months, demonstrating our commitment and confidence in the future," Mr Green said.

The tycoon bought Bhs in 2000.