Tesco still top of the heap in supermarket war

The latest improvement included a 10.7 per cent rise in total sales at its UK stores, even though the company revealed that it had had a more challenging year.

Tesco revealed that sales from its Internet operation rose 31.9 per cent on a year earlier to nearly £1bn, while Tesco Personal Finance made profits of £139m.

Tesco also announced plans to raise up to £5bn from the reorganisation of its property portfolio over the next five years.

The retailer, which overtook Sainsbury's as the UK's biggest supermarket chain in 1995, took £32.7bn in sales in its domestic market during the year to the end of February.

That represented an increase of 7.5 per cent when the impact of new store openings was stripped out.

However, Tesco indicated a recent slowing in its growth after the figure eased to four per cent in the final seven weeks of the year.

That reflected a weaker performance in January, but the rate of growth picked up in February and again in the early weeks of this financial year.

Operating profits from the UK rose 15 per cent to £1.79bn in the full-year period as the chain overcame the impact of rising energy cost, and business rates through better cost control and productivity. International sales were up 23 per cent.

Tesco's latest record profit comes during a period of uncertainty for the group.

As well as increased competition from resurgent rivals Morrisons and Sainsbury's, the company is to be part of a sector-wide investigation into the possible use of anti-competitive practices.

Pricing tactics and allegedly holding land to prevent rival retailers opening outlets have been called into question by the Office of Fair Trading.

Tesco shares have struggled to make progress, despite the company's continued dominance of the sector.

Growth in its shares has been limited to four per cent over the past year, making it one of the 20 poorest performers in the FTSE 100 Index.