Like-for-like sales were up 2.2% across the year, with a strong performance from food - but a decline for general merchandise as Tesco slimmed down the number of ranges it sells.
Shares in big four supermarket Tesco surged by more than five per cent this morning, after racking up its ninth consecutive quarter of growth as it reported results for the year, chalking up "another strong year of progress".
Tesco saw underlying profits rise by nearly a third to £1.64bn in the year just gone - its highest since the accounting scandal.
CEO Dave Lewis said it has been another year of strong progress.
In 2014, it recorded a pre-tax loss of £6.4bn.
Tesco has, therefore, announced a 2p final dividend, in addition to the 1p interim dividend announced in November, which brings the total dividend to 3p for shareholders to be paid on 22 June 2018.
Tesco's strategy of repurposing space in larger stores has so far seen 75,000 sq ft f space in 20 United Kingdom stores turned into concessions for retailers including Aradia Group, Holland & Barrett, Dixons Carphone and Next, while, following Tesco's merger with wholesaler Booker, a new Booker Chef Central concept stores has opened within its Bar Hill, Cambridge, store, which is aimed at professional caterers but is open to all customers.
Looking ahead, Tesco said it remains "firmly on track" to deliver medium-term ambitions outlined in October 2016.
Buying Booker is the boldest move yet by Lewis, providing Tesco with access to the faster growing catering segment of Britain's £200 billion grocery market.
"We have worked hard with our supplier partners throughout the year to mitigate price increases wherever possible, and made a significant investment in the first half to further hold back inflation and protect customers". However, inflationary pressures have started to ease in recent months, with the UK's consumer price index falling to 2.7 per cent in February.
At Unilever PLC (LON:ULVR), where he was president of the personal care division before joining Tesco, Lewis earned himself the nickname of "Drastic Dave" for cutting hundreds of jobs and products to simplify the business.
He said United Kingdom consumers had been resilient, but added it had been "difficult for a while and those challenges remain".
'Tesco is enjoying a renaissance, and its turnaround plan is literally paying dividends to shareholders, ' said Laith Khalaf, senior analyst at Hargreaves Lansdown.