Bosses revealed pre-tax profits for the 12 months to March 5 hit £854 million, compared with a £164m pre-tax loss a year earlier. This was also a three-fold increase on pre-pandemic profits of £278m.
However, the group, which also owns Argos, warned that profits would be dented in the coming year as it reduces prices to help customers with the cost-of-living crisis.
But before reducing prices, it said shareholders would enjoy a dividend bonanza, with payouts of 13.1p per share - a jump of 24 per cent on a year earlier.
The group’s preferred profit measurement - underlying pre-tax profits, which strip out one-off costs - hit £730m for the year. This is predicted to be between £630m and £690m for the coming year.
Sainsbury’s had a particularly strong time in its grocery division, with sales up 7.6 per cent versus pre-pandemic levels - although these were flat on the previous year.
General merchandise sales were down 4.6 per cent versus pre-pandemic levels as supply chain issues impacted the business and fell even further in the past 12 months, dropping 11.9 per cent.
Overall revenues came in at £29.9 billion - up 2.9 per cent compared with a year earlier.
Chief executive Simon Roberts said: “We know just how much everyone is feeling the impact of inflation, which is why we are so determined to keep delivering the best value for customers.
“We have been able to drive more investment into lowering food prices funded by our comprehensive cost savings plans. As a result, we continue to inflate behind competitors on the products customers buy most often.
“Last week we announced the next bold phase of investment, lowering prices across 150 of our highest volume fresh products.”
John Moore, senior investment manager at wealth firm Brewin Dolphin, said: “Broadly speaking, Sainsbury’s has posted a good set of results for the past 12 months, but all eyes are on the impact of inflation in the year ahead.
“The supermarket expects the higher cost of living to hit profits and it will have a difficult balance to strike between helping customers, upping staff pay, and maintaining its commitment to shareholders.”
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, noted: “Sainsbury’s has been on a conveyor belt of transformation and it is paying off, just when the group needs it the most to cope with soaring inflation and the squeezed budgets of shoppers.
“It’s warned that underlying profits will come in below expectation due to significant external pressures and uncertainties. The company clearly sees big challenges ahead in grappling with higher input costs caused by the commodity chaos unleashed by the war in Ukraine while simultaneously trying to keep prices low to hang onto market share.
“The penny pinching may hit where it really hurts for Sainsbury’s as it has had real success selling its premium Taste the Difference food.”