Tesco’s statutory profit before tax improved from a £6.3 billion loss last year back into positive territory of £162 million as the impact of a deep write-down in the value of its stores last year eased off and it developed promising sales momentum and reduced its operating cost base.

Although the full year Tesco result showed that core UK like-for-like sales were still negative, its performance has improved significantly. Like-for-likes grew 0.9 per cent during its fourth quarter, following on from a 1.3 per cent rise over Christmas.

Having suffered persistently at the hands of discounters Aldi and Lidl, customers have responded well to its fight back and aside from Sainsbury’s, it is now firmly outperforming Morrisons and especially Asda.

Over the last 18 months Tesco has reduced its food range by 18 per cent allowing it to improve availability, and developed its in-store service by introducing 9000 new roles. It has also cut the price of an average weekly shop by 3 per cent over the last year and has largely moved away from heavy promotions towards a more relevant everyday low price strategy.

Since its year end it has also simplified its price match scheme and launched a new Farm themed entry-level own label. Furthermore, 60 unprofitable stores were closed during the year, which along with a 25 per cent cut in its management team benefitted operating profits.

Elsewhere Eire like-for-likes turned positive in the fourth quarter for the first time since 2012, in reaction to price investments. European full year like-for-like sales improved 3.5 per cent amid a greater focus on price and fresh food and a consolidation of regional management teams.

Asian full year like-for-likes stabilised at 0.6 per cent following a marked improvement over the fourth quarter, helped by the sale of the Korean Homeplus business in September which was clearly not profitable. The sale of Homeplus helped generate cash and reduced group debt.

• George Scott is a senior analyst at Verdict Retail.