Tesco announced yesterday that it would create 26,000 jobs this year, including 11,000 in Britain, after its annual profits passed £3 billion for the first time.

The supermarket giant is now the world’s second-biggest retailer, in profit terms, after the US giant Wal-Mart, having overtaken Carrefour, its French rival.

Outstripping the City’s predictions, it reported a 10 per cent rise in pre-tax profits to £3.128 billion. This sent Tesco shares up by almost 5 per cent.

Tesco also said that, despite conditions being tougher in its home market than at any point in the past decade, it will press ahead with plans to increase its selling space in Britain by up to 7 per cent every year.

The retailer, whose share of the grocery market stands at just under 31 per cent, would in effect double in size if it keeps up this annual rate of growth over the next decade.

Sir Terry Leahy, Tesco’s chief executive, said that, in addition, the expansion programme this year would create about 7,500 jobs in the wider economy in areas such as construction. He pointed out that what were currently some of Tesco’s most successful stores were built and opened during the last recession 16 years ago.

“This is actually a very good time to be expanding because expansion costs less during a recession. We can build more stores more cheaply. Capital costs are down by 20 per cent and so we can get a lot more stores for our money.

Sir Terry added: “It is too early to call a recovery — but we are building a platform for growth that will last for decades.”

Tesco’s results come on the back of strong growth in Europe and Asia, into which the company has expanded aggressively over recent years.

Sir Terry said that, in Europe, Tesco had benefited from cross-border shopping as customers living in the eurozone took advantage of weaker currencies on their doorstep.

He also disclosed that Tesco will next month announce a £100 million relaunch of its popular Clubcard loyalty scheme in an attempt to win back customers from its resurgent rivals Asda, Sainsbury’s and Morrisons.

As The Times reported yesterday, Sainsbury’s is taking customers from Tesco for the first time in 18 months — partly, according to City analysts, because the latter has been distracted by dealing with the challenge from Aldi and Lidl, the German-owned discount chains.

Sir Terry said he was confident that, by launching its own discount range in stores last September, Tesco had seen off the challenge of the discounters — pointing out that sales of that range were now higher than Aldi’s total British sales.

The relaunch of Clubcard, which has 15 million holders, would be a way of boosting loyalty, he said. Shopping habits were changing because the consumers’ trust in retailers to hold down prices had been “shaken” by the spike in food inflation last summer.

He added: “In a recession, people do a lot more shopping around, that’s natural. As a result, there are a lot more promotional deals going on. The danger is that, if there’s too much of that going on, no one knows the price of anything any more.

“So you have to complement that with something that builds loyalty and rewards customers for staying with you longer term.”

Sir Terry said that he was reluctant to give details of the relaunch of Clubcard, in which Tesco invests £400 million annually, for competitive reasons.

But he insisted: “It is a big investment, there is real money going in. If it’s substantial in Tesco terms, it is a lot. I can’t tell you more now but it will be quite major.”

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