Tesco has reported an increase in profits and revenue in its preliminary results for the 2023/24 financial year, after inflationary pressures "lessened substantially".

The supermarket chain recorded profits before tax of almost £2.3bn, an increase of 159.5%, while the group made a revenue of £68.1bn, excluding fuel and VAT, a jump of 4.4%.

Group sales, excluding VAT and fuel, increased by 7.4% year-on-year, with Tesco raising £61bn. Operating profits also increased by 100.1% to £2.8bn.

Chief executive at Tesco, Ken Murphy, said: "This strong performance reflects the hard work of colleagues across the whole Tesco Group, and their commitment to serving our customers. Customers are choosing to shop more at Tesco, which is reflected in growing market share as they respond to the improvements we've made to the value and quality of our products.

"Inflationary pressures have lessened substantially, however we are conscious that things are still difficult for many customers, so we have worked hard to reduce prices and have now been the cheapest full-line grocer for well over a year."

Head of markets at interactive investor, Richard Hunter, added: "The hub of the business continues to flex its muscles in a notoriously competitive environment. Retail like-for-like sales grew by 6.8%, including an increase of 7.7% in the UK, and the value and volume of market share increased once more to stand at 27.6% (and 34% for the online business), putting clear light between its size and that of its nearest competitors.

"At the headline level, revenues of £68.2bn represented an increase of 4.4%, although fractionally shy of estimates given lower fuel sales. Adjusted operating profit was largely in line with expectations, rising by 12.8% to £2.8bn, while pre-tax profit showed an increase of 160% to £2.3bn after a non-cash impairment charge of around £980m the previous year dropped out of the comparative figures."

Looking forward, Tesco said that it expects its retail operating profit to reach £2.8bn, with an operating profit from the retained Tesco Bank business of around £80m, following the acquisition of the bank by Barclays.

Having exceeded savings targets over the past two years, accumulating £1.2bn, Tesco has said that it has a "strong plan" to deliver a further £500m of efficiency savings in 2024/25.

Lead equity analyst at Hargreaves Lansdown, Sophie Lund-Yates, added: "For all the positives, there are challenges to monitor. This includes the never-ending carousel of competition – this comes not only from discounters like Aldi, but the likes of Sainsbury’s are throwing a lot at honing their proposition.

"While retail margins aren’t languishing in the basement compared to historical averages, levels of around 4% in the UK don’t leave too much room for manoeuvre where disruption or fierce price wars are concerned. The outlook doesn’t include much expected uplift for retail profits in the new financial year, and remaining competitive will be one reason for this."

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