Tesco, Britain's biggest supermarket chain, posted record annual pre-tax profits of £2.95 billion today and revealed that it had notched up more than £1 billion in sales for each week of the year.

The group, led by Sir Terry Leahy, the chief executive, said today that sales had increased by 13.5 per cent to £59.4 billion over the 52 weeks to February 28.

Underlying profits before tax rose by 10 per cent to £3.13 billion and the supermarket group increased its annual dividend by 9.7 per cent to 11.96p.

Today's profits - the first time a UK retailer has breached the £3 billion mark on an underlying basis - helped push Tesco shares higher in early dealing. Shares were 4.5 per cent higher, up 14.8p at 346.6p.

However, trading losses in the US, where Tesco launched its Fresh & Easy stores in 2007, more than doubled from £62 million to £142 million.

Tesco said that sales at its American business were lower than last year because of its decision to "maintain, rather than accelerate our rate of new store expansion during the second half given the severity of the economic downturn in some geographic markets in the western US".

The UK retailer had targeted small start-up stores in America, but has faced an uphill struggle wooing US customers away from cheap rivals such as Wal-Mart, which owns Asda in the UK.

In its domestic market in the UK, Tesco posted a like-for-like increase in sales of 4.3 per cent from £37.9 billion to £41.5 billion.

As part of a concerted effort to win back customers who have been tempted by ultra-cheap rivals such as Lidl and Aldi, Tesco launched its Discounter range last year.

It said today that this had helped to boost sales in the UK but did not break out specific figures.

The Times revealed today that Tesco has begun to stem the departure of its customers to some lower-cost rivals, including Morrisons, the resurgent supermarket chain, but is still losing out to Asda, which has built its reputation on the sizeable discounts it offers in the UK.

Tesco, which is also planning to go head to head with Carphone Warehouse by opening in-house shops for mobile phones this year, has met greater sucess with its international low-cost sales drive.

Today it reported a 29.1 per cent annual sales increase in Europe, despite suffering trading setbacks in Ireland and the Czech and Slovak republics.

Tesco's, which claims almost a third of all sales in the the UK grocery market, said that it had invested £6.6 billion in expanding last year.

It said that it had plans to open 8 million square feet of new space this financial year, some three quarters of that outside the UK.

Tesco said that capital expenditure on expansion this year would be £5.6 billion, £1 billion less.

It also said that it planned to cut its £9.6 billion debt burden over the coming months.

The retailer, which employs 440,000 staff worldwide, said that it would create 26,000 additional jobs across the group, including 11,000 in Britain.

Sales in the first six weeks of its new financial year had started well, Tesco said.

In the UK, like-for-like sales, excluding petrol, have risen by 3.4 per cent in the six weeks following February 28, it said.

Total sales in the period were 9.2 per cent higher, Tesco said.

Richard Hunter, the head of UK equities at Hargreaves Lansdown, the stockbroker, noted that Tesco shares have outperformed the FTSE 100 index of blue-chip companies over the past six months, losing just 1 per cent of their value.

"While the company is not immune from the wider economic environment, these results have shown a resilience which should remind investors of Tesco's innate strength," Mr Hunter said.

Times Recommends

• Toyota recalls 437,000 cars including Lexus
• Myners says bonuses are bleeding pension funds
• Japanese company faked safety reports on seats