People paid more for less in Tesco last year as the business made £1 billion profit despite soaring food prices.
The supermarket said it made a billion before tax in the 12 months to the end of February.
But the profit was less than half of the more than £2 billion it made a year earlier – with the business trying to remain competitive by jacking up prices at a slower rate than some of its competitors.
Tesco said sales – the value of the products and services it sells to customers – rose by 7.2% to £65.8 billion even as the amount of product it sold fell.
Controlling prices has been key for Tesco; it wants to be seen as a better option for customers during the cost-of-living crisis, analysts say.
Just a day before announcing its billion-pound profit, the business said it would cut milk prices, making it the first supermarket to do so for three years.
The power of Tesco as the biggest supermarket in the UK means it has been able to negotiate better contracts with its suppliers.
But Sue Davies, the head of food policy at Which?, said the business’s profits mean it could be doing more to help shoppers.
“These results show Tesco is doing very well during the cost-of-living crisis while millions of its customers struggle to put food on the table due to soaring grocery price inflation,” she said.
“It’s clear that Tesco and all the major supermarkets could be working harder to make food more affordable for customers who need help.
Sharon Graham, the general secretary of trade union Unite, accused the company of “profiteering”.
She said: “How can it be that, at a time when millions are struggling to feed their families, Britain’s biggest supermarket is profiteering as never before? What sort of country have we become?
“Frankly, the latest results are obscene.”
However, analysts said Tesco is walking a tightrope – walking between pleasing shareholders by remaining profitable and gaining plaudits from customers.
Russ Mould, investment director at platform AJ Bell, said: “Tesco seems to be making the calculation that it can absorb some pain now to maintain and even improve its market share, particularly from the German discounters Aldi and Lidl, and emerge in a stronger position once the economic outlook starts to pick up.
“What Tesco doesn’t want to be drawn into is a race to the bottom on prices which cuts margins right to the bone for a prolonged period.
“For now, this is the tricky tightrope the supermarket must walk, while rewarding investors for their patience with steady dividends.”
On an adjusted basis, which strips out some one-off costs including a nearly £1 billion charge on property, operating profit dipped 6.9% to £2.6 billion, in line with what analysts expected.
The profit was hit by a trio of issues, including lower sales volumes, investment in the business and steep cost rises, Tesco said.
“Our results reflect our continued investment in delivering great value and quality for our customers, whilst at the same time looking after our colleagues.
“This is despite unprecedented levels of inflation in the prices we have paid our suppliers for their products and the cost of running our own operations.”
The business said it had taken a £982 million hit to statutory profit, largely due to an impairment charge on its assets – mainly its property portfolio, which was hit by an increase in discount rates.
Shares rose by more than 2% on Thursday.