The supermarket giant said on Wednesday morning that pre-tax profits slid to £825m for the 12 months to February, compared with £1.03bn the previous year.
It said profits were weighed down by £892m in Covid-related costs and the company's decision to hand £585m in business rates relief back to the Government.
It had benefited from a jump in demand for groceries during the pandemic, with more meals eaten at home amid restrictions on the hospitality sector and changes to working habits.
Group sales excluding fuel increased by 7 per cent to £53.4bn for the year, buoyed by soaring online sales.
Online sales jumped by 77 per cent to £6.3bn in the UK as the company doubled delivery capacity to meet rising demand from housebound customers.
Chief executive Ken Murphy said: "Tesco has shown incredible strength and agility throughout the pandemic.
"By putting our customers and colleagues first, we have built a stronger business.
"While the pandemic is not yet over, we're well-placed to build on the momentum in our business.
"We have strengthened our brand, increased customer satisfaction and improved value perception."
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