by business editor Trevor Sturgess

Tesco, the supermarket giant, is to create thousands of jobs after reporting record annual profits of £3.4billion.

Group sales to February 27 increased by more than seven per cent to £62bn, while pre-tax profit rose by 10 per cent to £3.395bn.

Overall, UK profits rose by 6.2 per cent to £2.41bn.

The company also announced the creation of 16,000 jobs, 9,000 in the UK. Chief executive Sir Terry Leahy said the jobs would be in stores and other operations across the country.

He said the business had weathered the economic storm well by remaining focused on its strategy.

"Across the Group, we have successfully adapted our cost structures and ranges to help customers save money when they've needed to and treat themselves when they've wanted to. Our positions in international markets and non-food meant we faced strong headwinds when the downturn came but it will be these parts of our business which will grow fastest as the recovery strengthens.

"Across all parts of our strategy - UK, International, Non-food, Services - our business is now stronger than it was before the recession. With leaner operations, improved market shares, strategic acquisitions performing well and a strong organic development programme, we're well placed for sustained profitable growth. And with the balance sheet strengthening, we have strong foundations in place for improving returns on capital going forward."

Analyst Richard Curr, head of dealing at Prime CFDs, said profits had been boosted by sales growth in the US and Asia. However, UK same-store sales slowed in the second-half, with growth of 2.7 per cent excluding petrol and adjusted for value added tax, compared with 3.7 percent in the first half.

"Prime CFDs views Tesco as a buy given the forecast-beating rise in full year net profits, which also confirms the dominant position the grocer enjoys in the sector," he said, adding that the group's overall performance remained sound.