Tesco revealed Wednesday that its earnings after taxation stood at £138 million ($197 million, 172 million euros) in its 2015/16 financial year, which ran until the end of February.
That contrasted sharply with an enormous loss of £5.7 billion the UK retailer had made during the previous financial year. The results, Tesco said, came on the back of strong sales.
Tesco hailed the "significant progress" as it returned to full-year profits, and also revealed the first quarter of sales growth for three years. But it noted that it was still cautious on its near-term outlook.
Chief Executive Dave Lewis said the retail chain continues to face a "challenging, deflationary and uncertain market."
The group also warned that its investment in price cuts would slow its profit improvement particularly in the first half, which sent its share price down sharply in Wednesday trading.
Tesco was rocked by crisis in October 2014 after erroneously reporting its profits. It is the world's third-biggest supermarket chain after global leader Walmart and France's Carrefour.
A major overhaul
In recent years, Tesco has been struggling amid mounting competition from rivals such as Germany's Lidl and Aldi discount supermarket groups.
In a bid to turn around its fortunes, the company appointed outsider and former Unilever executive Lewis in July 2014 to replace long-standing chief executive Philip Clarke.
At the start of 2015, Lewis announced plans to slash thousands of jobs and close unprofitable shops as part of a company-wide overhaul. Tesco has also offloaded a series of assets and last year sold South Korean unit Homeplus for more than £4.0 billion.
Last year's record loss was prompted by £7.0 billion of one-off charges, mostly linked to a writedown on the value of Tesco's property.
sri/cjc (AFP, Reuters, dpa)