Supermarket chain Sainsbury's has said it is seeing early signs of improvement despite unveiling a 62 per cent slump in annual profits to £254 million.
The group, which is in the middle of a major turnaround programme, said same-store sales fell by 0.4 per cent in the year to March 26 but this included a 1.7 per cent lift during the final quarter.
Chairman Philip Hampton said: "While it is pleasing to be able to report that our sales performance improved towards the end of the year, these are early days and there is much to be done to deliver our plans in a tough and competitive UK retail market."
The profits figure, which excluded exceptional items, was in line with market expectations.
The company hit a new low in its 135-year history in November when it announced its first half-year losses.
The former number one supermarket, which is in third position behind Tesco and Asda, has been working on improving its supply chain amongst other things.
It said this had delivered "very encouraging" results and those stores converted to a new system saw a 75 per cent reduction in out- of- stock products.
" We have made good progress on availability but there is still much to do," the group said.
Prices have been cut on 7,000 products in the last year in a bid to lure in more customers.
At the bottom line, Sainsbury's posted profits of £15 million against £610 million last time, after paying £234 million in exceptional items incurred by its turnaround strategy. Total sales increased by 5.5 per cent to £16.4 billion.
Chief executive Justin King launched the group's £400 million three-year recovery programme late last year.
The group expected a further £50 million of costs from the business review in its new financial year.
However, Mr King is confident that the investment is beginning to return.
"We're doing a significantly better job on our products and service, and our customers are rewarding us for this," he said.
Recent data from market analysts TNS suggests that customers are beginning to come back to Sainsbury's. The group's market share has stabilised at just below 16 per cent after years of decline, and the number of transactions is increasing.
Echoing comments from other UK retailers, Mr King said the trading environment was tough, but that the group remained on track with the three-year recovery plan launched in October last year.
Sainsbury's would continue to invest in product quality, availability and price as it attempts to deliver a sales-led recovery aimed at boosting the top line by £2.5 billion over the three years, the chief executive said.