Profits dipped at Asda in 2022 due to accelerating cost inflation but sales edged higher, it has been revealed.

The UK’s third largest supermarket chain, which is owned by the Lancashire-based billionaire Issa brothers and TDR Capital, said sales improved significantly in the latter half of the year after investing in price cuts as customers sought bargains in the face of the cost-of-living crisis.

Mohsin Issa said the retailer delivered a “highly resilient” performance during the year.

On Wednesday, the company said adjusted earnings declined by almost a quarter to £886m last year as it absorbed higher costs in its supply chain. Meanwhile, total sales rose by 0.1% to £20.45bn compared with 2021, although like-for-like sales were 0.2% lower.

It came during the first full year of ownership for the billionaire Issa brothers, who bought Asda alongside private equity backers TDR Capital in early 2021.

Sales during 2022 started sharply lower, falling 9.2% in the first three months as it failed to keep up with lockdown-boosted sales. However, the retailer reported that like-for-like sales grew by 4.7% in the third quarter and 5.4% in the fourth last year after seeking to improve its price position, amid rapid growth for discounter rivals, such as Aldi and Lidl.

Positive sales growth also continued into 2023, with strong demand in February, the grocer said.

Mohsin Issa added: “We took a conscious decision to support customers by investing heavily to mitigate the impact of inflation and keep prices as low as possible. Although this contributed to a decline in profitability, it was the right thing to do for our customers and will ultimately help to deliver long-term growth.

We are pleased with the strong sales growth we saw (in) H2, driven by investments in value and quality, and this positive momentum has continued into 2023 – with like-for-like growth of 6.8% in February.”

It comes as Asda continues with a convenience-focused growth strategy under its new bosses, with its first Asda Express stores opening in Sutton Coldfield and Tottenham Hale last year. The retailer plans to open a further 30 sites under the brand this year.

The group also bought 129 petrol forecourts and convenience stores from the Co-op, with regulators suggesting earlier this week that the deal could be given the green light after initial competition concerns.